PARIS — France’s Commission des Operations de Bourse, the equivalent of the Securities and Exchange Commission, has opened an investigation into the merger of the La Redoute catalog into the Pinault-Printemps retail and distribution group.
The COB described the investigation as “routine,” but also said it would look specifically at the trading of La Redoute shares during the weeks just prior to Feb. 18, when the deal was announced to the public.
La Redoute, with $3.2 billion (18.4 billion francs) in sales, is the third largest catalog in the world, offering everything from Karl Lagerfeld peignoirs and Jean Colonna T-shirts to microwave ovens and satellite dishes. La Redoute does business in more than a dozen countries and only the German catalog giants, Group Otto and Quelle, are bigger.
Under particular scrutiny in the La Redoute/Pinault-Printemps merger are the prices of the two groups’ shares when the deal was announced. Critics allege that trading of La Redoute shares was manipulated during January and February to make the deal seem more appealing to minority shareholders.
Before the deal was completed, Pinault-Printemps owned 54.36 percent of La Redoute. It now fully owns the company. To complete the deal, La Redoute shareholders received one Pinault-Printemps share for each La Redoute share they owned. Prior to the merger, Pinault-Printemps shareholders received for free an additional Pinault-Printemps share for every 10 they already owned.
The day the deal was announced, trading of both companies’ shares was suspended, with Pinault-Printemps shares quoted at $168.64 and La Redoute shares quoted at $162.71.
But it is the performance of Redoute shares during January and February, relative to the value of Pinault-Printemps shares, that is causing concern. La Redoute shares hit a high of $193.96 on Jan. 11, in line with the Paris Bourse, which was hot earlier this year.
Redoute’s price, however, began dropping steadily to close at $165.51 the day before the merger was announced.
One analyst said that while it is Pinault-Printemps, and indirectly its shareholders, that will benefit financially from the deal, the structure of the merger is legitimate. In a merger, the boards of both companies must agree to complete the deal, working under the majority approval of their shareholders.
In this case, however, it’s important to note that Pinault-Printemps controlled the La Redoute board, given its majority ownership.