PARIS -- France has caught the takeover bug. After watching from afar over the past several years as U.S. companies gobbled up each other, French companies, investors and speculators have suddenly started a game on their own turf.
The Paris Bourse, which had continued to slump following last fall's crash, jumped 10 percent in the first 10 days of February, riding an unprecedented wave of actual and rumored takeover plays.
"The speculators are smelling green blood -- that's money -- and they've come in for a fight," said William Timmerman, equities dealer with Paris stockbroker Puget & Co. Analysts say the crash instantly converted many overvalued companies into undervalued stocks, making them juicy targets for predators in the new year. Helping nourish the speculative wave is the Bourse's clubby atmosphere, which gives rise to rampant rumor mongering, brokers add.
However, they say it was the Martell & Co. takeover battle, launched in mid-December, that started the ball rolling. In that fight, two international liquor groups, Seagram Co. of Canada and Grand Metropolitan PLC of Britain, bid up the share price of the No. 2 cognac house to almost double its level a year ago.
Seagram won this month with an $850 million bid that represented 43 times Martell's earnings. In January, number three cognac house Remy Martin launched a hostile bid for Benedictine, a maker of sweet liqueurs, valued at 100 times earnings. Last week, Italy's Martini & Rossi came to Benedictine's rescue with a $160 million bid -- 116 times earnings -- leaving Remy Martin pondering whether to make a counteroffer.
A week ago, engineering group Schneider S.A. went after factory automation specialist Telemecanique Electrique S.A., announcing that it was preparing a formal bid. Analysts expected the bid to surpass the company's current market value of $910 million. While speculators delighted in the news, Telemecanique's 14,000 employees -- who own 10 percent to 15 percent of its stock -- expressed outrage and immediately jumped to their company's defense.
"We will go as far as striking if necessary," said one union leader at a meeting of the company's employees last week. "The battle has only begun." The workers took to the streets in Paris on Thursday, handing out protest leaflets on the Champs Elysees.
Framatome, the state-owned builder of nuclear power plants, was rumored to be amassing funds for a possible counterbid for Telemecanique. Speculation also was swirling around Compagnie du Midi, one of the most widely held stocks on the Bourse. However, its share price fell back on Wednesday after the insurance and real estate holding company announced that Italy's largest insurance group, Assicurazioni Generali SPA, had acquired almost 10 percent of its stock, apparently with its approval.
Meanwhile, a number of companies currently are the targets of takeover speculation on the stock market. They include Moulinex S.A., the kitchenwares company, and textiles company DMC S.A.
Brokers and analysts say France's outdated takeover rules -- and the failure of Bourse authorities to enforce them -- have created fertile ground for speculation.
Investors have five days to report acquisitions of more than 5 percent of a company's stock. "Such a long period makes the market so much more rumor-driven and speculative, and this has a snowball effect on other stocks that might not be targets at all," said Susanna Hardy, an analyst of the French market with James Capel & Co. stockbrokers in London.
The government is reviewing these regulations. Meanwhile, there are signs that the surge of hostile bids over the past month has created discomfort for France's tightly knit business community. In a letter recently sent to Finance Minister Edouard Balladur, a group of industrialists headed by Remy Schlumberger of Schlumberger Corp.'s founding family wrote that "the raiders should keep to friendly takeovers; savage takeovers are indefensible."
The main irritant, observers say, is not so much the matter of ethics or gentlemanly tradition as it is human relations.
"They all know each other and went to the same schools," Hardy said. Over the past year, other major French companies have defended themselves from potential hostile bids by forming "shareholder clubs" -- institutional stockholders who agree to stick together in support of the company if anyone attacks.
Others have been prompted into mergers that would make them too big to be swallowed by an unfriendly bidder. Such is the case with champagne and cognac maker Moet Hennessy, which last summer merged with Louis Vuitton, the leather goods company, after speculation had started on the Bourse.