French government eases grip on Renault with €1.2 billion sale

(Bloomberg) France gave up some of its control over Renault with the sale of a 4.7% stake in the carmaker that was acquired in a contentious power struggle two years ago.

The government sold 14 million Renault shares for €1.21 billion, reducing its stake back to its historical level of 15%, the state’s investment agency APE said. Renault acquired 1.4 million shares as part of the transaction and plans to offer them to employees, the Boulogne-Billancourt-based company said in a statement on Friday.

French President Emmanuel Macron, who spearheaded the stake purchase as economy minister in April 2015, is reversing the move as promised. The government had acquired the shares in a surprise move as it sought to thwart an effort by Nissan Motor to gain a say in its French partner. France prevailed in the spat, securing special voting rights that give it more sway in the automotive alliance than the Japanese carmaker, which generates a majority of the profit.

"This news is quite positive as it will reduce tensions" between the French government and Renault Chief Executive Officer Carlos Ghosn, who was sidelined in the stake purchase, Xavier Caroen, a Paris-based analyst at Bryan Garnier & Co said. "It will obviously not resolve governance issues" as France’s remaining holding will still limit closer capital ties with Nissan. 

France remains Renault’s largest shareholder after the sale, narrowly ahead of its Japanese partner’s holding.

Buoyed by stronger sales, Renault shares have climbed 16% in the last two months. The stock closed at €86.60 on Thursday, valuing the company at €25.6 billion. The stock jumped as much as 4.5% to €90.51 in Paris trading on Friday.

The sale resulted in a capital gain of more than €55 million for the state, APE said in a statement late on Thursday. The governance agreements, including capping France’s voting rights at 17.9% except in certain circumstances, will remain in place.

Renault said the transaction is "particularly timely" as it embarks on a strategy to double electric-car offerings in the next five years and widen its presence in China to fend off expansion by Volkswagen AG into battery-powered vehicles.