6.1 Recent developments (since 1 January 2021)

6.1.1 SIGNIFICANT EVENTS

6.1.1.1 STATE-BACKED LOAN FOR €465 MILLION AND SIGNATURE OF AN AGREEMENT TO AMEND AND EXTEND THE MATURITY OF THE REVOLVING CREDIT FACILITY TO MARCH 2023

In view of the uncertainty surrounding the ongoing health crisis, the Lagardère group has consolidated its financial position by arranging a state-backed loan and amending and extending the term of its revolving credit facility. All of these agreements were signed on 18 December 2020 and took effect in early January 2021.
Lagardère arranged with its main French and European banking partners a €465 million loan, of which 80% is guaranteed by the French State. The loan was validated by publication of the decision of the Ministry of the Economy, Finance and Recovery dated 31 December 2020 in France’s Official Journal (Journal officiel) of 3 January 2021. On 8 January 2021, the Group drew down the full amount of this loan.
The maturity of the state-backed loan is 12 months, with an extension option for up to five additional years. This option may be exercised at the Company’s discretion at the end of the initial one-year term.
At the same time, Lagardère amended and extended the maturity of its revolving credit facility with its banking partners, which involved:

  • adjusting the amount of the facility to €1.1 billion;
  • extending the term of a €1.0 billion tranche from May 2022 to March 2023;
  • redefining the covenants over this period to take account of the impacts of the health crisis on all of the Lagardère group’s businesses (see note 29.1.1 to the 2020 consolidated financial statements).

6.1.1.2 APPOINTMENT OF PIERRE LEROY AS CHAIRMAN AND CHIEF EXECUTIVE OFFICER AND FABRICE BAKHOUCHE AS DEPUTY CHIEF EXECUTIVE OFFICER OF HACHETTE LIVRE

On 29 March 2021, acting on the proposal of Arnaud Lagardère, the board of directors of Hachette Livre, the holding company of the Lagardère Publishing division, appointed Pierre Leroy, Co-Managing Partner of Lagardère SCA, as Chairman and Chief Executive Officer. Pierre Leroy succeeds Arnaud Nourry, who has decided to part ways with the Group on an amicable basis.
Also on 29 March 2021, acting on the proposal of Pierre Leroy, the board of directors of Hachette Livre appointed Fabrice Bakhouche as Deputy Chief Executive Officer.

6.1.1.3 PLANNED CONVERSION OF LAGARDÈRE FROM A PARTNERSHIP LIMITED BY SHARES INTO A JOINT-STOCK COMPANY

On 28 April 2021, Lagardère SCA announced that its Supervisory Board had positively received the proposal presented by Arnaud Lagardère to submit the conversion of Lagardère SCA into a joint-stock company to the 30 June 2021 General Meeting. This proposal is made in the perspective of:

  • Composed shareholder dialogue, the main investors in Lagardère SCA having agreed to vote in favour of the proposal, and Lagardère and Amber Capital having agreed to terminate their legal disputes;
  • Renewed governance structure, allowing for representation of the main shareholders on the Board of Directors;
  • Continuity of management around Arnaud Lagardère, who would be appointed Chairman and Chief Executive Officer, and Pierre Leroy, who would be appointed Deputy Chief Executive Officer, with added focus on operational excellence and cash generation;
  • Reaffirmation of the integrity of the Group, focused on its two pillars, Lagardère Publishing and Lagardère Travel Retail, together with its Other Activities.

As consideration for relinquishing their rights, the General Partners would be allocated ten million new shares. The consideration would be the subject of a valuation report prepared by an independent expert commissioned by the Supervisory Board which will render its opinion on the contemplated conversion.
The proposed conversion is subject to obtaining an exemption from a tender offer from the French financial markets authority (Autorité des marchés financiers – AMF) and the approval of the general meetings of the shareholders and the bondholders.
The proposed conversion would represent an important milestone in the Group’s history, built upon leadership in its different businesses and highly-committed teams.

MAIN TERMS AND CONDITIONS OF THE PLANNED CONVERSION: SUPPORT OF THE MAJOR SHAREHOLDERS
The proposed conversion (hereinafter the “Conversion”) and its terms and conditions were submitted by the General and Managing Partners to the main shareholders (1) of Lagardère SCA (hereinafter “the Company”), who have agreed to support it. No shareholders’ agreement or other common policy exists or will exist between these main shareholders and the Company (2), and none of them will exercise control over the Company after the Conversion.
In conjunction with the Conversion, Arnaud Lagardère and Financière Agache amended their partnership agreement within Lagardère Capital. Subsequent to the Conversion, Financière Agache may elect to receive Lagardère shares held by Lagardère Capital up to the amount of its interest in Lagardère Capital.
The Company and Amber Capital have signed an agreemen

(1) Vivendi, Qatar Holding LLC, Amber Capital and Financière Agache, which together with Arnaud Lagardère hold 76% of the Company’ voting rights.
(2) Save for previously disclosed concerts, i.e., (x) the concert between Arnaud Lagardère and the entities controlled by him and Financière Agache and Agache, and (y) the concert between Amber Capital UK and Amber Capital Italia.

COMPENSATION OF THE GENERAL PARTNERS
The General Partners, Arnaud Lagardère and Arjil Commanditée – Arco, would to be compensated for the loss of their rights through the allocation of a total of 10 million new shares.
Corresponding to approximately 7.62% of the Company’s share capital prior to the issuance of the shares and approximately 7.08% of the share capital after their issuance, this compensation will be the subject of a report prepared by the firm Ledouble, acting as an independent expert commissioned by the Supervisory Board, which will render its opinion on the contemplated conversion on the basis of this report.

GOVERNANCE
The proposed governance structure is intended to ensure management continuity for the Lagardère group (“the Group”) around Arnaud Lagardère’s leadership, and representation of the main shareholders on the Board of Directors.
Arnaud Lagardère would be appointed Chairman and Chief Executive Officer for the duration of his six-year term as a director and Pierre Leroy would become Deputy Chief Executive Officer.
Management services, which are governed by the Service Agreement currently in force between Lagardère Management and the Group, would be brought in house by the end of 2021 in line with terms and conditions to be defined by the Company’s Board of Directors.
The Board of Directors would have eleven members, including two directors representing employees appointed by the Group Employees’ Committee and nine members appointed by the Annual General Meeting, as follows:

  • three directors proposed by Arnaud Lagardère, including two independent directors;
  • three directors proposed by Vivendi, including two independent directors;
  • one director proposed by Qatar Holding LLC;
  • one director proposed by Amber Capital;
  • one independent director proposed by Financière Agache.

The directors would be appointed for four-year terms, except for Arnaud Lagardère, who would be appointed for six years.
Special measures would be introduced to prevent any transmission of sensitive information and limit participation in certain discussions to directors appointed by certain shareholders for as long as those shareholders control an activity that competes with the activities of the Group.
For a period of six years from the Conversion:

  • the Company’s main shareholders will have the right to propose the appointment of directors, as indicated above, provided the minimum levels of share ownership (1) in the Company are maintained;
  • the removal and replacement of the Chairman and Chief Executive Officer and the Deputy Chief Executive Officer, as well as any reduction in the conditions of their remuneration, and the appointment of new Deputy Chief Executive Officers, would require a decision of the Board of Directors, based on a two-thirds majority of its members.

Lastly, any disposal of publishing, travel retail or media assets representing revenue exceeding a threshold set for each of these activity groups (2), would require the authorisation of the Board of Directors, based on a three-fifths majority of its members.

CONDITIONS PRECEDENT TO THE CONVERSION
The Conversion will be carried out subject to the fulfilment of the following conditions:

  • an exemption from a tender offer is obtained from the AMF and such decision is cleared of any appeals;
  • the Conversion is approved by the general meetings of the Company’s bondholders to be held by early June 2021;
  • the Conversion is approved by the general meeting of the Company’s shareholders, to be held on 30 June 2021.

6.1.2 MAJOR CHANGES IN THE GROUP’S FINANCIAL AND COMMERCIAL POSITION

With the ongoing Covid-19 pandemic and travel restrictions still imposed by governments, the precise recovery trajectory for 2021 remains uncertain. The Group continues to put in place various measures to protect its profitability and preserve cash, while continuing to prioritise fine tuned business development and marketing efforts in its two divisions, Lagardère Publishing and Lagardère Travel Retail.
In addition, the Group has sufficient financial resources to meet its day-to-day requirements and its financial obligations. 

6.1.3 TREND INFORMATION

LAGARDÈRE PUBLISHING
In 2020, Lagardère Publishing benefited from the favourable impact of the health crisis on the consumer appeal of reading, the extent of curriculum reform in France, and the release of several publishing sensations selling over a million copies.
The positive impacts on book sales are likely to diminish in 2021 as leisure and cultural establishments such as restaurants, museums, cinemas and live entertainment venues reopen for business. In addition, the absence of any curriculum reform in 2021 will counter the positive impacts of the release of the new Asterix album in the fourth quarter of 2021.
It should be noted that due to business effects, results tend to be lower in the first half than in the second half of the year. As in 2020, management will also maintain a tight rein on expenses.

(1) Each shareholder may appoint a member as long as they hold at least 5% of the share capital. Arnaud Lagardère could appoint two members if he holds at least 6.5% of the share capital and three members if he holds at least 7.5%. Vivendi could appoint two members if it holds at least 15% of the share capital and three members if it holds at least 25%.
(2) €50 million for publishing, €100 million for travel retail, and €10 million for media, taken individually or aggregated over 12 months.

LAGARDÈRE TRAVEL RETAIL
In general, trading at Lagardère Travel Retail closely mirrors trends in air passenger traffic. Trading in the Travel Retail division remained sluggish at the start of 2021, owing to travel restrictions and in spite of the launch of vaccination campaigns in various countries. Forecasts published by various airport industry organisations are constantly changing, due to the prevailing lack of visibility. As of 24 February 2021, IATA forecasts indicate a drop in air passenger traffic in 2021 of between 62% and 67% versus 2019.
In 2021, Lagardère Travel Retail is continuing its efforts to protect its earnings that began in 2020. These include renegotiating leases under concession agreements, optimising overheads and payroll costs, and reducing other store operating costs. These measures led to a very favourable 19.9% flow-through ratio in 2020, a benchmark in its industry. Amid this uncertainty, Lagardère Travel Retail also continues its efforts to preserve cash, by reviewing its investments and maintaining a tight rein on working capital.

OTHER ACTIVITIES LAGARDÈRE NEWS AND LAGARDÈRE LIVE ENTERTAINMENT
With the ongoing pandemic and travel restrictions still in place, advertising revenues for Lagardère News (Paris Match, Le Journal du Dimanche, Europe 1, Virgin Radio, RFM and the Elle brand licence) continue to be dented by cost savings measures introduced by advertisers in certain sectors.
The prolonged closure of venues and the cancellation of numerous cultural events continue to take their toll on the Entertainment businesses (live performance venues).