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Pardus raises Valeo stake ahead of proxy fight

From Reuters| May 10,2007

U.S. investment fund Pardus has raised its stake in French car parts firm Valeo to more than 14 percent, it said today, ahead of a stand-off at the annual general meeting over supervisory board seats.

The proxy fight over the future of Valeo, pitting the management of Europe's second biggest car parts maker against a New York based activist shareholder, could become a test case for the conservative president-elect Nicolas Sarkozy over whether to let market forces prevail or to protect a leading French firm.

Pardus said it held 10.9 million shares in the second-largest car parts supplier in Europe and reiterated it was a long-term investor committed to Valeo, which has said it is in talks with investment funds about a possible buy-out.

Pardus previously had more than 13 percent.

Pardus is seeking eight board seats at Valeo at the annual meeting on May 21, but the board has asked shareholders to vote against the nominations, which include Pardus's Karim Samii and Joseph Thornton and former Arcelor chief executive Guy Dolle.

"It is not unreasonable for a main shareholder to ask for board seats," said a spokesman for Pardus, adding the group's main aim was for Valeo to conduct a strategic review including possible acquisitions of Visteon Corp. activities, the sale of units or a leveraged buyout.

Pardus has a 17 percent stake in Visteon.

On Tuesday, May 8, Valeo said independent proxy voting advisers Institutional Shareholder Services (ISS) and Glass Lewis rejected the proposals by Pardus.

The Les Echos newspaper said today that private equity firm PAI Partners was the front runner for a buy-out of Valeo after Apollo Investment Corp. and Cerberus dropped out.

A spokeswoman at Valeo said the company had no comment.

"If and when there is a firm offer we will inform the markets," she said, adding Valeo had indicated last month it expected talks with funds to last four to eight weeks.

PAI declined comment.


Valeo CEO Thierry Morin on April 25 said Pardus's request for eight board seats was "excessive".

He said he hoped the period of uncertainty would not last too long for staff and investors at Europe's second-biggest car parts maker after Germany's Robert Bosch.

The group was the target of a raid by Italian businessman Carlo de Benedetti in 1986, who sold out a decade later.

Morin said there were talks with several funds

"The moment one of these funds submits a written offer I will take it to the board to consider," he said. "I can imagine a fund taking control of the company but not taking it private due to the shareholder structure," he added.

Analyst Alexis Albert at Ixis said that things were heating up and Valeo's future was not sure and that pressure would rise.

Albert said he expected Valeo to be backed by the French shareholders such as the Caisse des Depots and Consignations, which has 6.5 percent, Toqueville Finance with 3 percent and AGF with 1.6 percent. But the votes of funds such as the Boston Company Asset Management, Franklin Templeton and Brandes -- the number three to five holders -- were less certain to back the management.

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