The announcement was made by Paolo De Cesare, chairman and CEO of the Printemps department store chain, in a brief statement to senior management on July 31st. Revealing that Divine Investments, a Qatari holding company based in Luxembourg, had bought 70% of the RREEF property investment fund managed by Deutsche Bank, De Cesare said: “The arrival of a new shareholder, who prioritises long-term property investment, is an opportunity for Printemps, and will allow us to place ourselves as one of the most attractive large [department] stores in the world. I count on you to create together a new chapter in the history of Printemps.”
De Cesari has every reason to be satisfied. The sale of Printemps has gone exactly to the plan worked out by both the Qataris and the Borletti Group, a company also based in Luxembourg and which is headed by Italian businessman Maurizio Borletti. While the Borletti Group is a 30% shareholder of the celebrated French store chain, it held the role of matchmaker for any takeover bid (see more here).
Bypassing the usual French legal procedures that require keeping staff unions informed (and who in this case refused to lend their support to a deal because of the lack of information they were given), the Borletti Group secretly signed an initial sale agreement with Divine Investments June 13th in Luxembourg. Divine Investment, according to the contract obtained by Mediapart, reached agreement to buy all stock in Printemps for a total of 1.6 billion euros. Mediapart has learnt that at the moment the deal was finally concluded, the final sale price had risen to 1.75 billion euros – representing a capital gain of 59% over just five years.
The following day, June 14th, in an internal email announcing the happy conclusion of the deal, a senior director of the Borletti Group, Paolo De Spirt, warned fellow management: “Please note that the [Printemps] company’s workforce has not been informed the signature of the sale and purchase agreement and shall be informed only after the antitrust filing [decision by the competition authorities]. For this reason we ask you to treat with the highest care and confidentiality the information provided for in this email.” According to his email, everything was due to be definitively settled by the end of July.
When De Spirt wrote the email, representatives of the works council of Printemps, a body coordinating the actions of all the staff unions, had just launched legal action in a Paris court for any deal to be suspended until it was informed and consulted about the process. On that point De Spirt noted: “Technically this move from the Union does not stop the sale process, unless the court were to require a second hearing, in which case it would generate a delay in the [sale] closing process.” Following a hearing of the unions’ complaint on July 2nd, the sitting magistrate announced a judicial decision would be pronounced on August 8th.
But the Borletti Group and the Qatari fund managers decided to go ahead with their deal without waiting for the court ruling. The worst legal consequence of that for them would be a fine of some tens of thousands of euros and the requirement that they begin a procedure to inform the workforce about the deal. The possible punishment appears derisory in a 1.75 billion-euro transaction (and which also includes a 23 million-euro commission for Printemps CEO Paolo De Cesare, and 40 million euros in commission for an intermediary in the deal, Nicolas Chassard).
The only concern for the dealmakers was to obtain a favourable decision by the French competition regulator, the Autorité de la concurrence, before the end of July. The deadline was important as a condition of payment of commissions to some of the parties involved in completing the deal – payments which in all probability explain the final sale price that reached 150 million euros above that initially agreed.
The green light from the competition regulator was granted on July 22nd. It came as a mere formality given that the Qataris own no other store chain in France, and therefore posed no danger of becoming a dominant market force. The transaction was finalized soon after.
The competition regulator did not bother to wait for the August 8th court ruling over the unions’ complaint that they had received no information about the negotiations for the deal. What appears more surprising is that it gave no consideration to a parallel complaint lodged by the unions with the Paris public prosecutors’ office in which they detail their suspicions, emanating from information gained from third parties, of fraud and tax evasion relating to secret commissions paid in the transaction. Mediapart has learnt from judicial sources that the prosecutor’s office opened a preliminary enquiry into the claims on June 28th, and which are the subject of an ongoing investigation by the French police’s financial crime unit, la brigade financière.
Separate administrative enquiries into the allegations have also been opened by the tax authorities, and the justice and industry ministries.
Mediapart contacted the competition regulator to ask why it had given its agreement to the sale without waiting for a conclusion to the ongoing investigations. “The Competition Authority is an independent institution that only deals with matters of competition,” a spokesman replied. “Our green light does not imply that we give agreement to all the [aspects of the] dossier. We are required to meet a legal timetable. In Phase 1 of the procedure [when the Authority must decide whether there is a threat to fair competition] we are required to pronounce an opinion in less than 25 days from the date when a case has been submitted to us.” There is thus apparently no allowance for the postponement of a decision.
So it is then that the Borletti Group and the Qataris were able, via the highly-paid services of lawyer’s practices which are so well versed in the Byzantine judicial clauses prevalent in France, to charge into the breach and seal the deal as they had planned. Their ease in doing so is heightened by an almost total indifference to their actions.
While the government gives great lip service to issues of combating fraud and tax evasion, it showed no concern for the events at Printemps, however steeped in suspicion these are, not even bothering to ask for clarifications of the transaction. While just one statement might have convinced the Qataris to respect the usual regulations in such a process, neither François Hollande, who visited the Qatari capital Doha on June 23rd, nor the prime minister’s office, nor the ministries of justice and economy and finance uttered a word.
Amid the silence, a Socialist party Member of Parliament for Paris’ eighth constituency, Sandrine Mazetier, tabled a written question on July 30th to economy and finance minister Pierre Moscovici in which she referred to the suspicions raised by the Printemps staff unions “not only concerning tax fraud, tax evasion, money laundering but also the risk of corruption and conflict of interest in this transaction.” She asked the minister “if he has enlightening details on the conditions of the sale and about the risks of tax fraud that implicate some of the parties in the transaction.”
It is likely that several months will pass before Moscovici’s reply is forthcoming, and the conclusions of the enquiries launched by the tax authorities and the public prosecutor’s office could take even longer. While there had been an opportunity to shed daylight on the deal, to prevent the risk of corruption that hangs over the dossier, the government preferred to allow the deal to prosper.
If the judicial authorities end up confirming the allegations submitted to them, there might be a trial in five or ten years’ time and perhaps a sentence pronounced, amid general indifference. After all, the Qataris and the Borletti Group are quite right not to be concerned. For the rich and powerful, French law is just a piece of paper.
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English version by Graham Tearse
- The French version of this article can be found here.