Renault reform faces barrier as French state swoops on shares

Renault's plans to maintain its share voting system are set to be undermined as the French government said it would spend as much as €1.23bn to temporarily lift its stake in the carmaker.

The treasury agreed to buy an extra 4.7 per cent of the carmaker, bringing its stake in the group up to 19.7 per cent and its voting stake to 23 per cent ahead of the annual meeting on April 30th, it said on Wednesday.

This follows a law passed last year - called the Florange law - which automatically grants double voting rights to shareholders who have owned the stock for at least two years, unless companies pass a resolution otherwise.

Renault is tabling a resolution to maintain a one share one vote system at the next annual meeting, and the French state believes that by increasing its stake to around a fifth of the company it will have enough weight to vote down the change.

"This deal shows the state's intention to use all the arms at the disposal of investors today to promote a progressive, long-term kind of capitalism," said Emmanuel Macron, the economy minister.

He added that this kind of capitalism "supports workers and helps companies grow".

The move shows the state's interest in maintaining a guiding hand over the French auto industry, although the government stressed that it intends to sell the newly acquired Renault shares after the vote.

The move is "in no case" intended to lead to a long-term increase in the state's stake in Renault, said the government, adding that it has acquired options to protect the value of the stock.

Last year the French state took a 14 per cent stake in Peugeot along with Dongfeng, the Chinese automaker, as part of a €3bn rescue package to help restore the fortunes of the carmaker.

The value of the 14m Renault shares being bought will be somewhere between €814m and €1.232bn, said the state. According to the last registration document before this increase, the French state had 44.4m shares in Renault.

The Florange law came into force after a political furore following the closing down of a plant in the eastern French region of Lorraine in 2012.

Before the law came into force, anyone who owned shares in a listed company for at least two years could be granted double voting rights, but only if the company made provisions to this effect in its articles of association.

The law reversed this, granting double voting rights automatically, unless the articles of association says otherwise.

The Florange law also requires large companies to make every effort, before closing a plant to find a buyer willing to keep it open.

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