An unlikely activist

France becomes Renault activist - to stop activism

The French government is turning into an activist-style investor at Renault - to pre-empt activism by others. Paris is forking out up to euro 1.2 billion to temporarily increase its stake in the French carmaker to 19.7 per cent. It's an ironic inversion of last year's Florange law - a controversial domestic reform to protect long-term shareholder interests from rapacious speculators.

The Florange law stipulates that investors holding a company's stock for at least two years receive double-voting rights, provided they register their shares in their name. Economy Minister Emmanuel Macron reckons this will promote "a progressive, long-term kind of capitalism that supports workers and helps companies grow." As it could pan out, a key beneficiary is the French state - specifically, its capacity to maintain control over the various big companies like Renault in which it holds significant stakes.

Firms can only preserve the normal "one share, one vote" system if two-thirds of the shareholders agree. Renault's board of directors wants this to happen, and with its previous shareholder structure, the ballot would have been a close call - outside investors would have controlled 75.5 per cent of the voting rights.

As it is, the state is buying enough voting rights to nip this in the bud: assuming the customary low attendance at shareholder meetings, there won't be enough support for the opt-out. Paris is hardly being subtle in its self-interested short-termism: it has already arranged a put option to sell back the additional shares after its obstructive work is done, valid for six months.

For Renault, the direct fallout of the government's manoeuvres will be limited. Despite the state's influence, the company has systematically shifted its production base to low cost countries. Last year, French factories accounted just for 19 per cent of the group's overall production, down from 51 per cent a decade ago.

Yet such state shenanigans scratch France's reputation in the eyes of outside investors. The blatant move to shift majorities into the government's favour suggests its penchant for interventionism remains unfettered.