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The City: It's all about the money

Published:  18 January, 2007

Ask any Frenchman to name five famous Belgians, and one of the answers is likely to be Albert Frre. The billionaire who began as a nail merchant has been a great facilitator', aiding French giants such as oil group Total, utilities combine Suez and insurance giant AXA to invest in Belgium of late.

Until recently, Frre held an influential stake in Socit du Louvre, which was controlled by the Taittinger family and into which was folded the eponymous Champagne house. But Frre decided, after years of supporting the Taittingers, that he wanted to cash in his stake, and so the whole of Louvre (including Groupe Taittinger) is being sold to US investment group Starwood for 1.7 billion.

Frre is a wine lover, and he part owns Chteau Cheval Blanc in St-Emilion. Now, seemingly, he wants to buy the Taittinger Champagne house when Starwood unbundles it. And he has outspokenly warned the French authorities about engineering une solution franaise to prevent the fifth-biggest Champagne house from being taken over by a foreigner.

To be fair, the Elyse Palace immediately denied any such intention, but there are uneasy undertones. Only recently PepsiCo was effectively seen off from bidding for dairy giant Danone, and a bid for Sanofi, the pharmaceuticals giant, was thwarted by xenophobic pressure. Also, the French government has drawn up a list of 10 "strategic" sectors over which it plans to grant itself the right to veto foreign takeovers.

So why not include Champagne in this list? Could anything be more symbolic of French culture? The first thing to be said is that, although the Taittinger family continues to manage the Champagne house, it is now foreign-owned, as are several others. Starwood wishes to sell on its new asset, probably for about e500m, and already there is a queue of potential buyers, headed by the Taittinger family. Secondly, the second-largest Champagne house, Lanson, is also on the market and the bankers in charge of the sale have received some 16 expressions of interest, many from international finance houses. Quietly blocking more than one foreign offer would be more than doubly difficult.

But the clincher is that the EU and America have just concluded a pact to give extra protection to names, including Champagne, in the US market, one that accounts for about 40% of all European wine exports and is worth about 1.35bn. National pride is one thing, but the national interest is probably bigger. When Starwood is ready, a bid from Frre for Taittinger will stand or fall on what financiers understand best - the amount of money offered.