By Michel Rose, Gwénaëlle Barzic and Mathieu Rosemain
PARIS (Reuters) - Behind the corporate battle for French media company Lagardere, there's a political tug-of-war involving the country's richest man, a media magnate and President Emmanuel Macron.
At stake is control of one of France's best-known private radio stations and its power to sway voters ahead of France's presidential election in 2022, when Macron could face off once again with far-right leader Marine Le Pen.
Macron fears that if media tycoon Vincent Bollore wins Lagardere, he could use its Europe 1 radio to inundate the airwaves with right-wing views and make the president's re-election bid even tougher, two sources close to the matter said.
So when Bollore's Vivendi (PA:VIV) built a stake in Lagardere in April, Macron's office relayed its concerns to Bernard Arnault, the billionaire founder of luxury goods empire LVMH and one of the president's early supporters, the sources said.
"The situation is being followed closely from on high," one of the two sources told Reuters.
Weeks later, Arnault stepped into the fight, backing Chief Executive Arnaud Lagardere's holding company with funds and pledging his support to the son of the company's late founder Jean-Luc, whom Arnault has said was his best friend.
Macron's office and a spokesman for Bollore declined to comment. LVMH did not respond to requests for comment on behalf of Arnault.
At the time, Arnault's move was seen as an attempt to bolster its defences in tandem with Bollore against the Amber Capital hedge fund in London, which has also built up a stake in Lagardere and campaigned to change the company's management.
A source familiar with Arnault's thinking said his attachment to Jean-Luc Lagardere was genuine, and had prompted him to act when his son sought help to fend off Amber Capital.
But the billionaire's move puzzled French business rivals.
FRENCH FOX?
After a career built on a reputation for penny-pinching on deals such as LVMH's renegotiated purchase of U.S. jeweller Tiffany, they wondered whether Arnault may have had another motive for ploughing funds into Lagardere.
After his initial investment of 80 million euros ($97 million), Arnault bought a direct stake of 7.75% in Lagardere, which is worth 209 million euros now.
Speculation has been growing in French media that there was a political angle to Arnault's surprise move to invest in a company racking up losses and debts as the coronavirus pandemic battered its global network of airport retail outlets.
Macron's inner circle was concerned that through Vivendi, now Lagardere's biggest shareholder, Bollore could consolidate his media assets and build a French version of U.S. conservative media network "Fox News", helped by Europe 1, the sources said.
Shortly after Arnault invested in Lagardere, a first pitch by Bollore to buy Europe 1 in June for 250 million euros was turned down by Lagardere's management, a third source said.
Vivendi declined to comment.
The company already owns France's biggest pay-TV company Canal Plus, whose free-to-air news channel CNews has taken a conservative turn since Bollore took control.
Anti-immigration and hardline law-and-order comments made by some of its talk show hosts regularly inflame social media and both its viewership and advertising revenues have jumped.
The network's boss Serge Nedjar has acknowledged that some of its commentators are provocative but said in a recent interview that the priority of CNews was to host open debates on all topics and there was no political line.
Lagardere's Europe 1 station has struggled with losses and falling audience numbers but has kept a following among urban, educated and more conservative-leaning listeners.
'NO MORAL BARRIER'
While Lagardere's arcane ownership structure gives its chief executive the right to veto significant decisions despite holding only 7% of the company, analysts still expect its major investors to try to grab bits of the business.
Vivendi now holds a 27% stake and has teamed up with Amber on 20% to push for board changes. Even Qatar's sovereign wealth fund, Lagardere's long-silent third biggest investor with 13%, has called for fair representation for all shareholders.
The moves have put pressure on Lagardere's management to deal with the situation, especially the billionaire dealmakers, while Amber Capital has maintained its campaign for an overhaul to drive a better share price performance.
Four sources close to the situation said discussions over how parts of Lagardere could be spun off had begun in recent weeks. One said that Arnault and Bollore had met in person.
The two have never been direct business rivals, and are not especially close, but neither is interested in an all-out war over Lagardere, people who know them said.
Bollore may be content to pick up parts of Lagardere's publishing division, home to Hachette, or agree to cede some media assets even if he launched a full takeover, an option that could unblock the complex saga, people close to the talks said.
Such scenarios were still speculative, the people said.
Letting Arnault take Lagardere's media outlets, which include the Paris Match weekly and Sunday newspaper Journal du Dimanche, however, could pose issues. The billionaire already controls financial daily Les Echos and newspaper Le Parisien.
Lagardere also owns a travel retail business, but the sector has been hit hard as the pandemic has pummelled the travel industry, and Arnault is experiencing similar problems within LVMH, which owns duty-free retail chain DFS.
But for those planning Macron's re-election campaign, keeping Europe 1 away from Bollore is a priority, especially given the growing popularity of CNews and its right-leaning commentators.
Its viewership doubled in October from last year and while it still trails France's market leader BFM, it's ahead of TF1's LCI news channel - and its transformation is not just alarming those in the corridors of power.
"The general idea is: in the name of freedom of expression, any right-wing person is welcome. There's no moral barrier," said Sebastien Cochelin, a CFDT union representative for Canal Plus. "We're playing with fire."
($1 = 0.8206 euros)