Press conference during the takeover. At the podium:Paul Martin andAntoine Riboud (second and third from left).

Standing: Michel David-Weill of Banque Lazard, currently vice-chairman of the groups Board of Directors.

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The bid.

At the end of December 1968, a takeover battle

grabbed the headlines for what was probably the first time in France, as BSNs bid to acquire Compagnie de Saint Gobain, one of Frances oldest and largest businesses, captivated public attention for over a month. Radio, television, press. The move was a logical continuation of the strategy behind the merger of Boussois and Souchon-Neuvesel two years earlier, the aim being to unite the two businesses and form a French group with the clout to keep pace with market growth and compete effectively with the heavyweights in the worldwide glass industry. The bid ultimately failed, but BSN was on its way to becoming a household name.

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The post-war boom

Tug of war
Following the go-ahead from Frances stock market supervisor, the bid officially got under way on January 3, 1969. The contenders faced off through the media and management declarations, with one side calling on Saint Gobain shareholders to tender their shares while the other sought to rally resistance. Antoine Riboud set out his arguments in a widely circulated brochure, published on January 13. The glass industry is now in the midst of the two biggest revolutions in its history, he wrote. In hollow glass, there is the switch from deposit to throwaway products, while in flat glass unprecedented technological change has crucial implications. In packaging glass, two figures sum up the challenge, he continued. Taking only three main beverages wine, beer and mineral water the demand is now for 800 million bottles a year. But this can be expected to rise to 12 billion a year as throwaway replace deposit bottles in these segments.

Clearly, glass alone will not be able to satisfy this demand [...]. Today, the competition is between glass, plastic, cardboard and metal cans. All have to fight for their place. And if glass is to come out a winner, we have to eliminate unnecessary transport, rationalize production to cut unit costs and keep a cap on investment [...]. As you will know, there have traditionally been two main categories of flat glass window glass and mirror glass. Pilkington in the UK has revolutionized the technology with float glass, which ensures that the two sides of the sheet are immediately parallel, without any additional processing. This has enormous commercial implications. The price differential between window and mirror glass no longer exists, and there will now be only one product the one with the highest quality for lowest cost. In 1962, Boussois took the lead, buying rights to the process for France and Belgium and in 1966 our first plant went into operation [...].

Realizing the economic and political dangers if Europe did not succeed in rising from the ruins of the SecondWorldWar, the United States supplied massive aid in what is commonly called the Marshall Plan. From 1948 to 1952, 16 European countries received a total of $12 billon, mainly in the form of supplies of raw materials, energy and capital goods. This opened the way for an era of unprecedented prosperity that only came to an end with the oil shock in 1974.In the years from 1953 to 1967 alone, per-capita national income tripled or more in France, Germany, Italy and the Netherlands.The economic policies accompanying this growth varied significantly, with Germany putting its faith in the market, while others such as France, Italy and the UK took a more or less interventionist path with nationalizations and central planning. Whatever they were, the underlying drivers for growth were extremely powerful. Reconstruction not only spurred production but also allowed radical modernization of infrastructure and equipment, raising productivity, while at the same time populations grew and birth rates headed up in France, where it had not increased since 1901, the population jumped from 40.3 million in 1946 to 46.5 million in 1962, while births rose from an annual average of 612,000 in 1938 and 1939 to 860,000 in the years from 1946 to 1950. Finally, dissemination of new technologies accelerated, including in particular the beginnings of information technology with the first computer produced in 1946.As a result, the supply of goods became more abundant and more varied, while quality rose steadily and relative costs declined. In addition, more and more people gained access to credit. Europe followed in US footsteps and entered the new age of consumer society.

Drawing byTim published in LExpress

The challenge of critical mass

Critical mass, meaning the size needed to compete effectively on a given market, is a concern for all businesses.Their sales must suffice to cover incompressible spending on advertising, innovation, research, industrial modernization and other items. Support for a brand, for example, costs the same, whether the business is small or large, and can quickly soar out of reach, demanding an excessive share of revenues. But critical mass can never be defined once and for all, since it changes over time, along with the

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business environment.The growing strength of competitors, downstream concentration in distribution, rising advertising costs and technological progress leading to a steady flow of more effective but also more expensive equipment together mean that the measure of critical mass regularly increases for most businesses.

To sum the situation up, [...] French glassmakers have to deal with these two developments effectively if they want to survive. The question is whether they are going to do that together, joining forces to save capital and be ready to compete with industry majors in the US, the UK and Japan in the years ahead. [...] That is what I hope will happen, and you should come to the same conclusion, as should the managers of Saint Gobain. This was the reason behind the negotiations for the restructuring of the glass industry that were launched at the end of 1967, which got under way in a friendly atmosphere between the managers of the two companies. Unfortunately, we were quickly convinced that despite the scale of the problem, the other party envisaged only minor adjustments, failing to address the core issue. We decided that we had to take action. We are passionately committed to the glass industry and we are convinced that rationalization can yield impressive results, creating an industry leader our country can be proud of, and rightly so. Which explains why we

launched our public tender offer to Saint Gobain shareholders on December 21. [...]. According to some rumors, Saint Gobain and its subsidiaries have something to do with massive share purchases on the market over recent week and have borrowed heavily in Germany, Switzerland and Belgium for this purpose. Is this the case or not? This question requires an immediate answer. It would be completely inadmissible for any such intervention to unsettle market prices in response to BSNs openly and honestly presented offer.

Main feedback concerns: younger people, who have clearly been captivated with the economic issues and the dynamism of this form of capitalism at work. The only evidence I need to show of that is the number of brilliant young people who want to work for our company, which is of considerable importance for the future of BSN; other countries, in particular the US. During my recent trip to the US, I saw that there was a great deal of interest in the bid and our company; finally, our share price clearly confirmed our decision.
(Antoine Riboud speaking to shareholders at the Annual General Meeting on June 27, 1969)

A defeat carrying the seeds of success

To begin with, the cost of the bid comes to approximately 3.5 million, which is close to the amount of our annual advertising budget. On the positive side, public recognition for BSN has clearly benefited, although the effects of this higher public profile are difficult to assess.

Tender offers taking control of a business

There are several ways to acquire all or part of the capital of a company listed on the stock market. One is to reach an agreement for a share swap with the shareholders of that company, which means that they agree to receive a given number of the shares of the offering company for their own shares, based on an agreed parity or relative value. This was how BSN acquired control of Evian, Kronenbourg, Gervais Danone and other companies between 1970 and 1980. Another way is to discreetly buy up the companys shares on the market, but the outcome of this is always uncertain.The third alternative is to make an offer to all the target companys shareholders to buy their shares at a given price or swap their shares for those of the offering company on the basis of a defined parity.This is the safest solution when the target companys management opposes the takeover, since the transaction only takes effect if the shares tendered in response to the offer reach the defined number. BSNs bid for Saint Gobain in 1969, based on a proposed exchange of shares, was the first major operation of its kind in France, following the model established in the US. At the end of the 1980s, there were a large number of bids as large businesses with renewed financial strength scrambled for critical mass on their various markets. Counting some 200,000 shareholders around the world, none with an interest exceeding 6%, BSN could have been a tempting target for some of its competitors on international markets or for certain financial groups, and it thus adopted a number of technical measures including limits on voting rights to counter the risk. But the best assurance of independence, as we are well aware, remains the market price of company shares, which depends in large part on the present and expected quality of business performance.

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