Letter from Colette Neville (Adam) to AMF, Company News

Mr. Robert Ofel
president

Management of financial markets
17 Exchange Square
75082 PARIS Cedex 02

CC: Directors of EDF
Mr. General Director of APE

Chartres, July 21, 2022

Mr. President,

During her general policy statement, the Prime Minister confirmed the state’s intention to own 100% of EDF’s capital, thereby effectively nationalizing the company through a market operation. Therefore, on July 19, the state announced its intention to launch a simplified takeover bid for EDF shares in order to delist them at a price of €12 per share and €15.64 per OCEANE (bonds convertible into shares).

We can only approve the decision on “renationalization” which will enable the state to have all the means, both legal and financial, necessary to carry out its missions of general interest and “ strengthen our ability to implement ambitious and important projects for our energy future as soon as possible.” This decision will also have a great advantage, as it will put an end to the situation of conflict of interests in which the state found itself after the opening of capital, the common interests for which it is responsible, which led to the use of the power of the majority shareholder to impose on the company decisions that undermine social interests and interests of shareholders.

On the other hand, a draft public offer accompanied by a €12 squeeze-out is unacceptable, as it does not comply with the principle of fairness on which the law on public offers is based, and even more so with the squeeze-out principle. . Therefore, a fairness opinion issued by an independent expert must be presented to the AMF by the offeror at the time of the offer.

In its current form, justice is not observed for the following reasons:

1) ” Nemo auditur propriam turpitudinem allegans” the old proverb of Roman law has already been said. No one can take advantage of their own worthlessness.

It would be unfair for the State that initiated the Takeover Offer to retain the company’s current value as the basis for shareholder compensation, while EDF’s loss of value is due to its high participation in decision-making. it took and which, no matter how useful or necessary they were from the point of view of the general interest, caused damage to the shareholders.

Some of these decisions were also the subject of a complaint by employee shareholders:

– sale at a loss of at least a quarter of the electricity produced by the NPP, according to the AREHN mechanism;

– tariff restrictions;

– modernization of AREHN (which was the subject of a complaint to the European Commission and an appeal to the State Council);

– the closure of Fessenheim for political reasons

– taking over “Photowatt” in court and participating in the rescue of “AREVA”, which is on the verge of bankruptcy.

– payment of dividends with negative cash flows: in this regard, the Accounting Chamber notes in two of its reports (July 2012 and January 2017) “ EDF’s dividend policy did not adequately take into account the company’s medium-term financing needs, so EDF paid out to its shareholders for the 2010 financial year more than double its annual profit, taking over the share capital at the request of shareholders” (i.e. hypermajority state) “in 2014, after paying a dividend of €2.14 billion, EDF’s cash flow was negative by €4 billion, meaning the company had to borrow to pay that dividend”

Other decisions, such as those involving the Hinkley Point construction site, which led to the resignation of the chief financial officer and a hearing by the National Assembly, also weighed heavily on the share price.

Without evaluating the usefulness or even the necessity of these decisions in the general interest, it is clear that they are largely responsible for the loss of the value of the company and that it would be contrary to the most elementary justice for the State to be able to base itself on the depreciated value of the company in order to compensate the minority shareholders whom it decided to expropriate , moreover, at the bottom of the market, at the height of the energy crisis.

2) Fairness, on the contrary, requires that the reversion to nationalization results in a sham transaction for the shareholders and therefore that the minority exit be at the IPO price adjusted for dividends received.

By deciding to return to 100% capital, the state de facto admits that the opening of capital was a mistake. Justice requires that the shareholders, the collateral victims of this mistake, are able to return unscathed and that their transfer to EDF’s capital amounts to a black transaction. This is very far from the case if the exit price is set based on current value, whether based on the average of market prices over the last 60 days or the last 12 months, as is done in the July 19 press release. , or expert assessment according to the usual criteria of the multi-criteria method.

In this regard, it should be noted that the usual criteria seem inapplicable to this case. dn due to significant uncertainty affecting all factors that must be taken into account (price trends, costs, project completion times, interest rates, lack of comparable transactions, etc.). Any estimate based on such uncertain data can only lead to ranges so wide as to be meaningless.

On the other hand, the law leaves the experts full freedom to keep the criteria that seem most appropriate to them, nothing prevents to keep the listing price (€32) as the main criterion in this case. , less the dividends received by the shareholders throughout the period (i.e. €15.42), so that their transfer to EDF capital effectively results in a white transaction. Thus, the offer price will be set at EUR 16.58.

3) The reference to the initial price is all the more necessary, since the placement on the market was carried out under questionable conditions.

The “great popular success” of the EDF stock launch in 2005 raises serious reservations:

first of all, regarding the proper informing of natural persons: It is to be feared that many have followed the pleadings of their “banking advisers” without reading the 569 pages of the AMF Information Note and its 224 pages of appendices [1] ;

secondly, because the pressure of the bank’s consultants on their clients was significant to the extent that some shareholders became shareholders “without knowing it of their own free will” or added “fictitious children” to them.: these forced sales were the subject of complaints from individuals to the AMF (Les Echos of 4 September 2007), which decided to impose sanctions on BNP Paribas and Société Générale.

finally, because marketing in 2005 was done at a high price: the price set by Bercy at €32 for individuals (€33 for institutions and €25 for employees) was indeed higher than the indicative range announced at the launch of the subscription (€29.5-€34, €10)[2]. Faced with the reluctance of professionals, the share of securities provided to them had to be reduced from 50% to 40% and, conversely, the share of individuals to be increased to 60% in order to “encourage large popular ownership of shares”. In fact, 4,900,000 individual shareholders, including 130,000 employees, were involved in the operation, but in late December 2000, in an article entitled “Operation Populist Capitalism Turns Fiasco”, Les Echos notes that massive bank support was required within days. after introduction maintain courses. [3]

4) It would be unfair if privatization ended up being a bargain for the state and a financial disaster for minorities.

However, this is what will happen if the minority shareholders are expropriated at the price of 12 euros stipulated by the state:

As for minorities, during the period from the IPO (November 18, 2005) to July 20, 2022, the return on investments with reinvested dividends is negative (minus 13%) for the EDF shareholder, while for the Livret A holder it was 30.85%, and that at the same time, the CAC 40 rose by 140.57%, the SBF 120 by 155.88%, and the STOXX600 Utilities Index by 177.88%.

Regarding the state, on the other hand, the assessment of the privatization period is far from negative: it received 27 billion in dividends and transferred 3.7 billion euros from the sale of 2.5% of the capital at a price of 82.5 euros on December 3, 2007, the highest price just before the crash of 2008, for a total of more than 30 billion euros. The State Treasury also collected tax on dividends paid by minority shareholders, estimated at 1.4 billion euros. [4].

5) Finally, it would be unfair for the minority exit operation to be an opportunity for the state to make a bargain by buying at a lower price a company whose devaluation he had largely contributed to. As for the squeeze-out, it is also about determining not the price, but the amount of compensation (see Article 237-6 of the General Regulations of the AMF ” accounting depositories carry out transactions for the transfer of securities not presented in the last offer of the initiator, who pays the corresponding amount compensation of these names……..” Justice requires that this compensation for expropriation be such that it undoes the damage that the state, the majority shareholder that expropriated, caused to the millions of depositors who trusted it in 2005.

Thanking you for taking these considerations into account during the exchange of views you may have had with the various stakeholders prior to the submission of the state proposal and, at the latest, when it will be reviewed for compliance, I, please accept, Mr. President, the expression of my highest respect.

Colette Neville



[1] In vain would anyone argue that they also had a 76-page transaction summary note in their possession, as it states that “Any decision to invest in EDF shares in an open price to the public in France and a guaranteed global placement with institutional with investors in France and abroad (as well as with the public in Japan) should be based on a comprehensive review of the prospectus relating to the open price offer and the guaranteed global investment mentioned above. »

[2] Les Echos from November 21, 2005

[3] The damage suffered is apparently much greater for those who bought 45 million shares sold by the state for €82.50 (€66 for employees) in 2007, the highest price just before the 2008 financial crisis.

[4] At a tax rate of 30%