Complex European firms `should follow US model'

CONTINENTAL EUROPEAN holding companies with complex shareholder structures will have to come into line with British and American models if they are to attract overseas investment, according to Warburg Dillon Read, the investment bank.

The comments came a day after Warburg paid pounds 300m for 10 per cent stakes in two French companies, the inter-linked Marine-Wendel and CGIP, which are trading at huge discounts to their asset values. CGIP owns a 20 per cent stake in Cap-Gemini, the IT services group.

Warburg wants to work with CGIP's chairman, Ernest-Antoine Seilliere, to unlock the value in the businesses and believes action by such a high profile company could lead to a domino effect across Europe.

"This is the next convergence trend," said John Woods, one of Warburg's corporate finance team. Breaking down complex structures, which often discriminate against minority shareholders, is likely to become more of an issue following the introduction of the euro and greater European integration.

Warburg has built up a portfolio of stakes in European companies with similar structures to CGIP. These include 5 per cent stakes in Gaz et Eaux, the French utility, and EuraFrance, a French holding company. It also has holding in companies in Italy, Belgium and Sweden.

Warburg is scheduled to meet Mr Seilliere in January to put a set of proposals to him on how the changes might be implemented. Its action follows a move on Pathe, the French group which holds stakes in BSkyB and CanalSatellite, by French businessman Vincent Bollore. Pathe shares trade on a discount to the value of these stakes alone and Mr Bollore has bought a 10.5 per cent stake and hopes to unlock the value.

Warburg believes the prospect of more highly-rated paper and gentle nudging by more active Anglo-Saxon investors will push the complex,French shareholding structures into being re-modelled on British and American lines.