A French soap opera is about to unfold

The world's richest woman just died. If you didn't know this, please stop focusing on the tweets and turn your attention to more weighty matters of the world.

Liliane Bettencourt passed away four days ago at the age of 94. She was the heiress to the founder of L'Oréal, the world's largest cosmetic company; the only child of Eugène Schueller who founded L'Oréal in 1907. She herself worked in the company from the age of 15 and rose to become its deputy Chairperson.

The future of L'Oréal is now in play. And therein lies a story that could give a beating to any soap opera on television.

In 1974, fearing that France would nationalise the company, Bettencourt did a deal with Nestle wherein she offloaded about half her holding in exchange for shares in Nestle. Since then Nestle and Bettencourt have had one of the longest tangos in business history. Nestle, a food company, with no presence at all in cosmetics, had a 30% stake in the world's largest cosmetics company (now down to 23%). But in an agreement with Bettencourt, Nestle remained a sleeping partner and promised not to acquire any more shares or to bid for Bettencourt's own shares as long as she was alive. Presumably Nestle had thought that she would not live so long. But they kept their word and until now have not interfered at all in the business just pocketing the dividends and biding their time. So much so that very few outside the business world probably even know that Nestle is a major shareholder in L'Oréal.

In the meantime Bettencourt's life over the last decade has been another soap opera all by itself. Sometime in 2007, at the  ripe age of 84, she took a fancy to her photographer and started to bestow gifts to him worth over €1 billion. Her daughter filed a complaint with the police that her photographer was taking advantage of her weakened psychological stake to amass a personal fortune. She and her daughter had an extremely public spat with each accusing the other of having gone mad. The courts finally made Bettencourt's grandson as her overseer and the fortune was vested with her daughter and her two grandsons. But everything was in a state of limbo as long as she was alive.

Cue the events in Nestle. Nestle , for long, has waited patiently to consummate what was really a delayed acquisition. Both the last two Chairmen of Nestle sit on the L'Oréal Board. They were probably waiting for the death of Bettencourt to acquire L'Oréal . But alas they now have an activist shareholder in Dan Loeb who has a fair stake in Nestle and is pushing it to do the opposite - sell the stake in L'Oréal and return the money to shareholders. So there is no saying what Nestle will ultimately do - acquire L'Oréal or divest !

There are other big fish circling. Given how cheap debt is , there are enough and more funds of various stripes, including probably the notorious 3G Capital and their close friend Warren Buffet, who are getting all excited. Also interested would be two giants in the cosmetics field - Unilever and Procter & Gamble, who have long eyed Nestle's stake with envy and made noises about what a Foods company is doing with a stake in a Cosmetics company.

Complicating this will be nationalism, for after all L'Oréal is (very) French. Would Macron be willing to let a French institution fall into the hands of the ugly Americans ? If he interfered, the tweeter in chief would surely have something to say !!

And what will Françoise Bettencourt Meyers, Liliane's daughter and the two grandchildren to whom the 30% stake in L'Oréal passes, do ?  Would they act in concert. Or would they go their own ways ? Would they buy ? Or sell ?

Every investment banker is drooling and shivering with anticipation. It is fair to assume that no first class seats are available on all flights to and from Paris, London, New York and Lausanne !

Watch this space. The knives will be out on 18th March when the six months period after Bettencourt's death ends and  all agreements expire.    Bettencourt's life was colourful to say the least - marrying a Nazi sympathiser, losing money with Bernie Madoff,  a strange affair with her photographer, being declared mentally incompetent, accused of giving cash stuffed envelopes to Nicolas Sarkozy,  having numerous Swiss bank accounts ...... But even by those standards, what will follow in the fight for L'Oréal will be, to put it mildly, interesting.

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Élection présidentielle 2017

France goes to the polls on Sunday to elect a new President. If you haven't been following this election, then you are missing something. It's a very crucial election and is much more fun for an outsider to follow than the US Presidential elections.

This blog largely tries to steer clear of political issues and focuses on the economic ones. So, although this blogger has strong views on the candidates and knows who he would vote for if he had a vote, he will avoid discussing that here. Instead, the focus is strictly on economic policies, which is of course, only one dimension of evaluating any candidate.

Who's the most dangerous of them all economically ? If the pat answer is Marine Le Pen, a more polished version of Trump, think again. Introducing Jean-Luc Mélenchon, the far left candidate who is currently surging in the polls . Nearly 20% of France want him as President .

Here are his economic policies, without comment

• 90% tax rate for those earning more than Euro 400,000 a year
• 273 billion Euros higher spending over 5 years
• 16% rise in minimum wage to Euros 1326 a month (Rs 90,000 a month)
• 35 hour work week.
• Exit the Euro
• Abolish the treaties prescribing a target of deficit to GDP . In other words, simply print money
• Exit EU, a la Britain, if necessary
• Join Alba the economic pact between Cuba and Venezuela. Honourable observers of this pact are Iran and Syria
• Right to housing to become a constitutional right
• Nationalise utility companies

There is more, but this is enough for the time being.

The system of French elections is such that that he is unlikely to get through even in the first round. But it should give a pause for thought that a full 20% of the French electorate is willing to subscribe to such lunacy.

The right to vote is a heavy responsibility. Concepts like protest vote, angry voter, etc are deadly pitfalls. You are supposed to consider the options carefully and vote according to what you think is best for your country. You can have differing views, but irresponsible exercise of the franchise is catastrophic.

If you are of the view that this is all fear mongering, capitalism has failed, and we should give such a philosophy a try (yes, I am talking to you , if you have felt the Bern), then all I will say is that this has been tried before and the example is there for all to see. Venezuela.

The loony left is even more dangerous than the rabid right.

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Bye Bye Bengal, Hello France

The capital of militant and inflexible labour is France. The title that Bengal held in the 70s and 80s seems to have been taken over by France.

These are bad times everywhere in the world. France is not immune to the ill winds. Factory closures and job losses, are alas, everywhere. French workers have reacted to it, by contributing to a new word in the English language – "bossnapping”. Holding bosses hostage until their demands are met. What in India, is called ghereao.

Now there is a report of the workers at a failed auto supplier threatening to blow up the factory unless the supplier’s customers – Peugeot and Renault – pay € 30,000 to each worker. This is a rather unique demand. They aren’t asking their own employer, for they know that their employer does not have the money. They are asking their employer’s customers !

Losing jobs is one of the most demeaning things that can happen to anyone. The anger is understandable. But the reaction will harm France for a generation to come. That’s what happened to Bengal. Bengal has become associated with “difficult labour” because of what happened in the 70s and 80s. Its no longer true of course – the Bengali worker of today is as hardworking, committed, and non militant as any other , if not more. In the service industry today, Calcutta is a very attractive destination – wage levels are a tad lower, commitment is high and attrition rates are amongst the lowest. And yet the image of “difficult labour” has stayed, however unfair it may be. And it won’t go away that easily for a generation or more. Bengal, the pride of India, now lags behind economically.

This is the problem for France. However huge a country it may be, it cannot stand in isolation. It needs the rest of the world to come, invest, create jobs, etc etc. But that won’t happen if the French worker is considered synonymous with laziness and militancy. This is absolutely untrue. But the image is becoming one of that. And images, unfortunately, matter.

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