HK investor backlash over Dailymotion intervention

A Hong Kong investor who was in talks to buy a stake in French online video start-up Dailymotion has lashed out at the government's "cynicism" for derailing the deal and allowing Paris-based Vivendi to make a last-minute bid.

Charles Brown, head of investment company Lake House Group and a partner in the bid with PCCW, the Hong Kong telecom group, said the intervention by economy minister Emmanuel Macron had led them to avoid France as an investment destination.

"One would have thought Emmanuel Macron would resist political pressure," said Mr Brown. "It's done, we're not bitter, but are we and PCCW getting near France? I doubt it. Not any time soon."

PCCW declined to comment.

Mr Brown said the Dailymotion process highlighted the insular nature of France's business and political elite, and he refuted the minister's claims of pragmatism. "The appropriate word should be 'cynicism'," he said.

"I was fairly sceptical going into this but I didn't expect this to get that crazy. The whole thing is very French. And we don't have political clout."

Mr Brown added that Mr Macron, who had met Richard Li, PCCW's chairman, at the Consumer Electronic Show in January, had given "clear assurances" that their investment in Dailymotion was welcomed.

He accused the government of giving in to demands from powerful French business leaders including Marc Ladreit de Lacharriere, head of Fimalac, the financial services group, and Vincent Bollore, chairman of Vivendi. Lazard was brought in to solicit competing bids under different terms: Orange was suddenly ready to sell a majority stake, not just 49 per cent.

Mr Li and Mr Brown considered raising their offer from €250m to €280m to reflect the controlling stake, but when they were told an April 17 deadline for final bids had been brought forward to April 7, they stepped away. Vivendi won with an offer that valued the company at €265m.

The outspoken criticism casts a cloud over Mr Macron's attempts to lure foreign investors to socialist-ruled France and break away from the approach of Arnaud de Montebourg, his outspoken predecessor who blocked the sale of Dailymotion to Yahoo! in 2013 and tried to block GE's takeover of Alstom.

Mr Macron, a 37-year-old former Rothschild banker, has portrayed himself as more pragmatic, going so far to facilitate the €16bn sale of telecom equipment maker Alcatel-Lucent to Finnish group Nokia.

But as Orange was about to enter into exclusive talks with PCCW, the minister unexpectedly ordered the state-backed telecoms group to review "all other options". <

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The comments came after Orange's board, which includes three representatives of the state, had already given permission to management to negotiate the sale of a 49 per cent stake in the Dailymotion to PCCW and Lake House, according to three people with direct knowledge of the matter.

Mr Macron said last week: "It's my role as shareholder to make sure we get the best option. I was right since Vivendi's offer ended up higher."

Mr Brown said his and Mr Li's joint offer would have helped Dailymotion expand internationally, in particular in Asia. PCCW owns other media interests, including a pay-TV service and a digital music streaming site. But they felt they were being used to inflate the price and withdrew.

"We were told very clearly by Orange that our chances were slim," Mr Brown said. "As Asian investors, it's important for us not to look stupid in our home market."

Orange did not comment on the manoeuvring in the build-up to striking a deal with Vivendi. Fimalac also declined to comment.

With additional reporting by Jennifer Hughes and Lucy Colback in Hong Kong

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