Outlook: Pathe/Bollore

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The Independent Online

IT'S BEGINNING to seem quite like the City over there in Paris. For years the French business establishment has been controlled by a closely knit elite of financiers, professional managers and bankers. Business has been as dirigiste as government. This cosy and protected world is supported by an interlocking structure of cross shareholdings and cascading capital structures, sometimes quite Byzantine in its complexity and obfuscation. Certainly it has seemed immune to outside interference; the idea of shareholder value is as alien to the French palate as a plate of fish and chips.

But perhaps not for much longer. In the past few years the soft underbelly of these structures has come in for persistent attack. Sometimes it has been Anglo-Saxon traders looking for value, at others it is the newer generation of French financiers not bound by the old ways. Here's another example of it.

Vincent Bollore is a Gallic Lord Hanson, whose acquisitions have transformed his cigarette making business into a $1bn fuel and transport empire. Recently he abandoned his attempt to prize open the family-controlled construction group Bouygues. Now he is turning to Pathe, another family-led enterprise where he yesterday emerged as a 10.5 per cent shareholder.

Pathe has two main assets - a 12.7 per cent stake in BSkyB and 20 per cent of CanalSatellite, France's leading satellite pay-TV operator. Shares in Pathe trade at a big discount to the value of these two stakes alone. Take in the company's other media interests and there is plainly very substantial breakup value in Pathe not recognised in the share price.

This is not uncommon in French and other continental holding companies, but because they tend to be controlled by family or banking interests - in Pathe's case by Jerome Seydoux and his family - it is not easy to get at the hidden treasures. If you are part of a minority in a French company, you are likely to get legged over.

Mr Bollore, a business enemy of the Seydoux family, thinks he can help realise that value by forcing a sale of the Sky and CanalSatellite stakes. Even five years ago, this sort of shareholder value agitation was almost unheard of in France. Today it is becoming increasingly common. After the launch of the euro in the New Year, integrated European capital markets will become a reality and we are going to see a lot more of this sort of thing, right across the Continent.