Reuters logo
UPDATE 2-Rothschild revamp plan keeps clan in control
April 5, 2012 / 1:01 PM / 6 years ago

UPDATE 2-Rothschild revamp plan keeps clan in control

* Banking dynasty to take full control of subsidiaries

* “Completion of unification process” -Vice-Chairman, Europe

* Move will boost regulatory capital, strengthen family control

By Lionel Laurent

PARIS, April 5 (Reuters) - The Rothschild banking dynasty is to consolidate its operations in France and Britain to make its capital base look stronger under new tougher regulations whilst maintaining the family’s grip on the business.

The move shows that even one of the best-known names in banking, whose roots date back to the 18th century, is having to adapt to the regulatory push for a safer industry after the financial crisis of 2008.

Under the plan, the Rothschild Group’s main holding company, Paris Orleans, will issue new shares and swap them for minority stakeholdings in its French and British subsidiaries.

The resulting elimination of separate minority shareholders in businesses like London-based investment bank N.M. Rothschild & Sons, and the elevation of those minority interests to a stake in the holding company, will boost regulatory capital under the incoming Basel III regime.

No cash changes hands, but Basel III measures give a higher weighting to capital held this way.

At the same time, Paris Orleans will adopt the takeover-proof French legal status of “societe de commandite”, a limited-partnership structure that will strengthen the family’s grip and maintain majority voting rights even though it could end up with a smaller stake.

Favoured by other family-owned companies like Michelin or Hermes, the status makes hostile takeovers virtually impossible.

“It is the completion of the process of unification for the group,” Gerard Worms, Vice-Chairman of Rothschild Europe, told Reuters. The unified structure already exists at a management level and now will happen at the shareholder level, he added.

David de Rothschild, current chairman of Rothschild Group, will become chairman of the new vehicle. As head of the French branch of the Rothschild clan, he is also the great, great, great grandson of the dynasty’s founder Mayer Amschel Rothschild.

SURVIVING SETBACKS

The Rothschilds’ banking empire has over the centuries raised funds for the world’s most powerful nations and financed massive engineering projects like the Suez Canal and railroads.

After surviving several setbacks - including nationalisation of its French assets in 1981 - and after facing down increased competition from younger international banks, the dynasty’s French and British branches unified their shareholdings in 2007.

Today, 250 years after Amschel first set up his banking business in Frankfurt, the dynasty is moving to ease the burden of looming regulations.

It is not alone: The race to adapt to Basel rules, designed to crack down on banks’ risk-taking in the wake of the 2008 financial crisis, has seen banks across the industry slash jobs and sell assets to cut costs and shrink their balance sheets.

Rothschilds’ move is less drastic, but it brings complications. Under French law, the family must offer to buy out minority shareholders in Paris Orleans, so it is making an offer of 17 euros per share, or a premium of 4.2 percent on Wednesday’s closing price.

However, Rothschild has obtained guarantees from some Paris Orleans shareholders including Jardine Matheson Group and German insurer Allianz not to tender their shares for cash, which would limit the cost of acceptance by others.

Shares in Paris Orleans were up 3.31 percent at 1113 GMT, to 16.85 euros, giving it a market value of 531.7 million euros ($697.5 million).

If no Paris Orleans minorities accept the offer, the Rothschild family and its allies will own less than 50 percent of the stock, down from 58.4 previously, but they will still have a voting majority.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below