Open questions over Decaux float

Decaux has been able to avoid answering questions in the past but, after flotation, it will be forced to make itself more transparent.

The family-owned French outdoor company Decaux has always been highly secretive about much of its operation. But plans to float on the Paris stock exchange are likely to change all that and force it to open the business to public scrutiny.

At the end of last month, Decaux officially confirmed its intentions for flotation on the Paris Bourse, and it has appointed Goldman Sachs to oversee the move. As yet, details are limited and no definite timetable has been established. Media analysts predict it will offer between 20 and 25 per cent of its capital.

The company’s intention to float “as soon as possible” is no great surprise. It was always thought Decaux would have to raise some money after its £650m takeover of Avenir.

Most observers believe the French company paid about 25 per cent over the odds for a clutch of poster businesses, which included Mills & Allen in the UK.

At the time, annual group profits were estimated at £20m-£25m on a turnover of £340m.

Raising extra capital will also enable Jean-François Decaux, chief executive of the Decaux Group, to deliver the £50m promise of investment in the Mills & Allen portfolio.

As a publicly quoted company, Decaux will find things a little different, no matter what percentage it opts to sell. “The dynamics of working for a plc [or equivalent]is going to be quite different from working in a private company,” says Annie Rickard, chief executive of Posterscope.

“Maiden had a long history of family ownership, and then floated 25 per cent of its company. When the 48-sheet market took a nose-dive last year, it was open to much more scrutiny than other [outdoor] companies,” she adds.

Decaux will be under a similar microscope, albeit in France, particularly about its efficiency, and it will have to provide detailed information about its trading circumstances.

The move could also affect the high percentage of senior positions occupied by family members.

The business is headed by Jean-Claude Decaux, with three of his sons in the business. Jean-François Decaux is in charge of the UK, Australia and the US; his brother, Jean-Charles, is based in Paris where he runs the billboard business and heads Decaux in most of Europe; and the youngest, Jean-Sebastian, is finding his feet running the Tesco six-sheet business in the UK.

Flicking through a Decaux brochure is like perusing a family album, with various cousins and uncles filling senior positions within the organisation.

The company now intends to lure people from outside the family by offering share-options. Jean-François Decaux is credited with being the driving force behind this change in strategy. As one insider says: “If you want to build your business, there comes a point when the cousins simply run out.”

Decaux’s decision to float on the Paris Bourse, and not on the London stock exchange or Nasdaq, signals a radical departure from its original intentions. Last year, Jean-François Decaux said he would float the company on either the London or New York stock exchanges – or both (MW April 29 1999).

The question as to why this change of mind happened is one of many that Jean-Fran̤ois Decaux has refused to answer. However, it may tie in with recent speculation that he is to return to France Рa move he has denied vigorously (MW March 30).

A spokeswoman for the Paris Bourse says there are three different markets Decaux could choose to float on – Premier, Second and Nouveau. It is unlikely to float on the Premier, because the company must have a turnover of more than E1bn (£625m).

If it chooses the Nouveau, it will not have to disclose certified accounts in the first instance. Eventually Decaux will have to operate in a more transparent way, but disclosure requirements in France are more liberal than in the UK.

Whichever market it opts for, it will have to familiarise itself with answering to the public.

Some issues may be difficult for the company to debate. In January, Jean-Claude Decaux was sentenced for his part in a French scandal involving favouritism. A schools contract was dished out to one of the Decaux companies without other bids being invited. He was fined FF100,000 (£10,000) and given a six-month suspended sentence for having negotiated the contract with a French politician (MW February 3).

This conviction, which he is appealing, was not his first. Jean-Claude Decaux was given a year-long suspended sentence back in 1992 after he was convicted for unlawfully contributing thousands of pounds to the re-election expenses of the mayor of Liege, in Belgium, where Decaux held the street furniture contract.

The company’s desire to raise capital through a public offer means it must accept it will face the issue of public accountability and that it will have to answer many questions it has not needed to in the past. That means operating in a more open and “outside the family” manner.

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