Lagardère under pressure to shake up board

An activist hedge fund is reportedly proposing a shake-up to Hachette's parent company, the Lagardère Group, arguing its supervisory board is not sufficiently "independent" to hold the management’s strategy to account. 

According to the FT, London-based investor Amber Capital, which owns 3.9% of Lagardère, is now refusing to back the re-election of the company’s supervisory board chairman, Xavier de Sarrau, a lawyer specialising in governance issues, on the grounds it believes he is not independent after receiving €240,000 from Lagardère for advisory services for eight years while serving in the role. 

Amber is also reportedly refusing to back Patrick Valroff, a former Crédit Agricole executive. Instead the investor has proposed two new directors should be appointed ahead of its annual meeting today (Thursday 3rd May). They are Helen Lee Bouygues, a strategy consultant and former McKinsey partner, and Arnaud Marion, a restructuring specialist. But Lagardère’s board have said they are both ill-suited to the positions because "their very profile as specialists in corporate restructuring is not suited either to the board’s mission or the group’s situation".

Olivier Fortesa, a managing partner at Amber, said: "Given that Lagardère is a partnership, the only counter power to management is the supervisory board. The supervisory board needs to be fully independent so it has an objective view and it can hold management’s strategy to account."

Lagardère has several divisions which, in addition to publishing, include travel retail and sport and entertainment. In particular, according to the FT, Amber takes issue with Lagardère's acquisition of €865m sports agency Sportfive in 2006, believing it paid over the odds and was poorly integrated into the business. The FT said the group had undertaken to review its sports and active divisions in November and prioritise publishing and travel retail instead.

Fortesa added: "How capital from any disposals is redeployed in travel retail and publishing will be key. Lagardère needs to avoid repeating the same mistakes of the past."

The role of Lagardère’s supervisory board is to "carry out ongoing supervision of the Company's management" and "ensure that the Company has the resources it needs to assess and monitor its risk exposure". According to its website, "the supervisory board has always been committed to ensuring that its members are chosen for their managerial, financial, strategic and legal skills and experience, and their professional ethics, so as to be able to respond appropriately and fully to all the requirements needed for its supervisory role within the Lagardère group."

The Lagardère Group recorded revenue of €7,069 million in 2017, up 4% year-on-year, which it attributed to a strong performance in its travel retail arm and "good momentum" at Lagardère Publishing.

Publisher Hachette UK, owned by the Lagardère Group, has declined to comment.