My previous blog was on the US corporation Google Inc. This time I'll be covering the French public limited company (Société Anonyme or S.A. in French) Danone S.A., a global food company. This is a pretty complex case study and I do not intend to do it full justice here. What follows is a summary of what I believe are key characteristics of Danone S.A.'s control and ownership structure. As it was the case for my previous blog, this case is built on the concepts discussed in Chapters 1-3 of "International Corporate Governance".
Danone S.A.'s most recent company report (or 'registration document') is available from here. You might need to click on '2013' to obtain the most recent available company report at the time of writing this blog.
This might be obvious, but it is always a good idea to start by having a look at the table of contents. This should give you a fairly good idea where to find important information on control and ownership. Below I have highlighted in yellow what should be important sections in the company report (click on the picture to make it larger):
Let us start with Section 7.1 "Company's Share Capital". First of all, Danone S.A. has only one class of shares:
So, it is different from Google Inc. which has two classes of shares. But hey, as we are going to see this does not mean that this example is any easier than the previous one on Google Inc.! Let us now move to Section 7.6 "Voting Rights, Crossing of Thresholds". This is where things get interesting:
Danone S.A., as a lot of other French companies, confers multiple voting rights (double voting rights to be specific) to long-term shareholders who have registered their shares with the company and have owned the shares for at least two years. However, things are more complicated than that:
Danone S.A. also has a voting cap or limit of 6%. However, for shareholders who have double votes (see above) the limit is 12%. Nevertheless, this voting cap will become void if a single shareholder acquires more than two thirds of the company's shares as a result of a public tender offer:
There is more interesting information (such as the reasons for the voting cap) on this same page, but for the sake of brevity I shall skip it. Let us now have a look at Section 7.7 on the share ownership structure:
Danone S.A. does not have a majority shareholder or a shareholder with a blocking minority. This is typically the case of companies with a voting cap in place. Similar to Google Inc., there are differences between the percentages of votes and the percentages of cash flow rights individual shareholders hold. Some shareholders, such as Sofina & Henex group and the Danone employee fund, hold more votes than cash flow rights. Others, such as MFS group, hold fewer votes than cash flow rights.
Returning to Chapter 3 of "International Corporate Governance", Danone S.A. would fit under combination C given its voting cap. However, it would also fit under combination D given the provision of conferring double voting rights in its articles of association. Nevertheless, the voting cap is the strongest of the two provisions. Hence, Danone S.A. does fit under combination C as control clearly lies with the management rather than a large shareholder. This means that the main potential conflict of interests for this company is between the management and the shareholders.