As previously announced, LVMH is in exclusive negotiations with Pearson over the proposed acquisition of Groupe Les Echos (Les Echos) for €240m.
Both companies believe that the quality of Les Echos’ journalism is fundamental to its reputation in the business and media communities, and to its commercial success. They have therefore determined that arrangements for continuing Les Echos’ tradition of editorial quality and independence, and for securing the employment prospects of its people, should be a fundamental part of the proposed transaction.
In recent weeks, Pearson has initiated a dialogue with the employees of Les Echos, including its Works Council and Society of Journalists, and has discussed their concerns and ideas with LVMH.
As a result of this process, LVMH and Pearson have developed a series of measures designed to protect editorial independence and jobs at Les Echos.
Editorial quality and independence
The editorial independence arrangements, which will be incorporated into the statutes of Les Echos, include the following:
1. An 11 member supervisory board will be established, which will include three independent members and the editor-in-chief of Les Echos.
2. The three independent members will be appointed by the Company’s shareholders from candidates agreed unanimously by a committee comprised of representatives of LVMH and the Society of Journalists.
3. Mr. Israelewicz will be Editor-in-chief of Les Echos (as previously announced, he will assume this role on September 1, 2007 on the retirement of Mr. Jacques Barraux). Neither Mr. Izraelewicz nor any future editor-in-chief may be dismissed by the Supervisory Board without the approval of at least two independent members.
4. Any future editor-in-chief will be nominated by LVMH subject to the approval of the supervisory board, including at least two independent members, unless the appointment is vetoed by a majority of journalists at Les Echos.
5. The same appointment process will apply to the editor-in-chief of “Enjeux”.
6. An ethical charter – a high level framework for the protection of editorial quality and independence – will be agreed by LVMH, Pearson and the Society of Journalists.
7. An Editorial Independence Committee will be established, consisting of two members of the supervisory board representing LVMH; two of the independent members and two members appointed by the Society of Journalists. Its role will be to ensure that the values of the ethical charter are upheld. The Committee will consider complaints from any editor or journalist regarding any alleged breach of the editorial independence by the shareholders. If the Editorial Independence Committee upholds a complaint, the Committee will require the Editor to publish the complaint prominently in the newspaper and the affected journalists may exercise their ‘Clause de Conscience’, which allows them to resign and receive a dismissal payment.
8. These editorial independence arrangements can only be changed with the approval of two of the three independent members.
1. There will be no redundancies of Les Echos people for at least 3 years.
2. The terms of the existing collective agreements will be maintained for at least 5 years.
3. All employees entitled to exercise their ‘Clause de Cession’ right, which allows them to resign and receive a dismissal payment as a result of the sale, will have the right to do so for two years from the closing.
LVMH and Pearson believe that these arrangements provide a sound foundation for the continuing journalistic and commercial success of Les Echos.
More detailed summaries of the arrangements are available below.
Main principles of the Editorial Independence at Les Echos
The Supervisory Board
- – A conseil de surveillance (the Supervisory Board) shall be set up in the by-laws of Les Echos (the Company), consisting of eleven members, including three independent members (the Independent Members) and Les Echos Editor-in-Chief (“Directeur des Rédactions”) who shall be an ex officio member of the Supervisory Board. The chairman of the Supervisory Board shall be chosen from amongst the Independent Members. Independence will be defined to exclude from the position of Independent Member any person whose relationship with LVMH could impact their judgment and to include people with significant experience and who are well regarded in media, business or the intellectual sphere.
- – Independent Members shall be appointed by the Company’s shareholders from candidates agreed unanimously by a committee comprised of an equal number of representatives of LVMH and the Societe des Journalistes (SDJ) (the Committee). Each mandate, including the mandate of each Independent Member, shall be granted for a three year period. The Committee shall also be in charge to verify that the candidate has no relationship with LVMH such that his judgment could be impacted. In the event the Committee is equally split about such verification, the concerned candidate shall not be appointed. Each Independent Member can only be dismissed by the Shareholder (i) for any act or behaviour which is not compatible with their office and with the prior approval of the Committee or (ii) with the prior approval of the two other Independent Members. Each Independent Member shall once a year report any significant relationship he has with LVMH group on a specific register that shall be kept by the Company and be available to employees.
The Les Echos Editor-in-Chief
- – Les Echos Editor-in-Chief shall (i) be nominated by LVMH; (ii) approved by a simple majority of the Supervisory Board, including at least two Independent Members, and (iii) unless the appointment is vetoed bya majority of journalists of Les Echos. Journalists are those entitled to vote in employee representative elections at Les Echos. He or she may be dismissed by the Supervisory Board but only with the approval of at least two Independent Members. The same rules shall apply to the Enjeux Editor-in-Chief.
- – Mr. Erik Izraelewicz will be the Les Echos Editor-in-Chief as from September 1st, 2007 on the retirement of Jacques Barraux and the Shareholder will ask Mr. François Langlet to remain Enjeux Editor-in-Chief after the closing of the transaction.
- – All appointments to the editorial office (including columnists and contributors) shall be made by the respective Editors-in-Chief.
- – Any decision relating to the use of the brand “Les Echos” (or any related brand including the words “Les Echos” owned by the Group) by or with a third-party shall require a prior approval of the Supervisory Board after consultation with the Editor-in-Chief.
The Ethical Charter
- – The Shareholder and the Supervisory Board shall be required by the by-laws to perform their duties and exercise their powers with due regard to an ethical charter, subject to any requirements of French law which shall take priority. The ethical charter shall be a document agreed between LVMH, Pearson and the SDJ and containing a short, high level set of principles relating to quality of information and independence. Changes to the ethical charter can only be made with the approval of at least two out of the three Independent Members.
Editorial Independence Committee Procedure
- – An Editorial Independence Committee shall be set up to allow any editor, journalist or journalists belonging to the same business sector or journalists having written on the same issue (Affected Persons), to bring, individually or together, complaints that these persons have suffered, directly or indirectly Actual Influence. For this purpose, Actual Influence is defined as the shareholders seeking to prevent or discourage any Affected Persons from writing an article, or changing the substance of an article by any means.
- – The Editorial Independence Committee will comprise (i) two members of the Supervisory Board representing LVMH, (ii) two Independent Members, and (iii) two journalists from Les Echos s appointed by the SDJ.
- – Affected Persons shall have the right, individually or together, to exercise the “clause de conscience” if the Editorial Independence Committee decides by a majority of four out of six members to uphold the complaint and report it to the Supervisory Board. Any complaint that is withheld must be reported in full to the Supervisory Board.
- – By the same majority the Editorial Independence Committee will require the Editors-in-Chief to publish a statement describing the complaint and its decision to report it to the Supervisory Board prominently in Les Echos or the editorial page of Enjeux as appropriate.
- – The by-laws shall contain provisions relating to the composition of the Supervisory Board, the dismissal of Independent Members, the appointment and the dismissal of Les Echos Editor-in-Chief and the Enjeux Editor-in-Chief and the Ethical Charter as described above.
- – Any change to the by-laws of the Company relating to the composition of the Supervisory Board and the appointment and dismissal of the Les Echos Editor-in- Chief and Enjeux Editor-in-Chief shall require the affirmative vote of the shareholders, including of at least two out of the three Independent Members.
Summary of employment guarantees at Les Echos
The LVMH group understands that a proposed change of control is liable to be of concern to the employees of the Les Echos group. In order to reassure the employees, LVMH has discussed the employees’ concerns with Pearson, and is willing to make a number of commitments that would apply if the Les Echos group is acquired by LVMH:
Employment and structure of the Les Echos group
- – For a period of 36 months following the sale, LVMH will not carry out any redundancy dismissals (“licenciement économique”) within Les Echos group companies, though it notes that the employee representatives’ request on this point was that the commitment would not apply if turnover decreases by more than 20% against the 2006 turnover.
- – More specifically, since LVMH’s aim is to preserve the quality of the Les Echos group’s publications, LVMH will ask the group’s editors to take the necessary steps in terms of employment of editorial staff and employees with the administrative executive status to preserve that quality and, if a large number of these employees use their change of control rights (“clause de cession”) following the acquisition, to maintain the current level of editorial and administrative executives headcount, within unchanged budget levels as compared to the current levels.
- – For the same 36-month period, LVMH will not change the legal structure of the companies currently forming the Les Echos group ‘economic and social unit’ (UES), nor the scope of this unit (including through outsourcing)
Collective benefits and net salary
- – the amount of net salary (subject to changes in applicable law on contribution rates) paid to the employees of Les Echos group companies (including freelance journalists, for an equivalent volume of work) under existing agreements and commitments;
- – the current calculation and distribution rules for mandatory employee profit share (participation); or
- – the level of welfare benefits (subject to changes in applicable law), in particular as regards pension rights, currently enjoyed by the employees of the group companies.
– LVMH accepts the Les Echos employee representatives’ request to maintain the existing collective agreements, commitments and practices for five years following the sale, subject to changes in applicable regulations (including the applicable collective bargaining agreement).
- – LVMH undertakes that for a period of five years following the acquisition, it will not change:
‘Clause de cession’ rights: exercise window
- – Employees and freelance journalists who are entitled to exercise ‘clause de cession’ rights under Article L.761-7 of the labour code or under the collective bargaining agreement for administrative executives in the Paris daily press sector shall be entitled to do so for a period of 24 months following the sale.
Severance pay on exercise of ‘clause de conscience’ or ‘clause de cession’ rights
- – For journalists: 1 month’s pay per year of service up to 15 years, and 1.5 month’s pay for service in excess of 15 years;
- – For administrative executives in the Paris daily press sector: according to the collective bargaining agreement.
– The level of severance pay due on exercise of ‘clause de conscience’ (including in the event of a complaint admitted by the Editorial Independence Committee) or ‘clause de cession’ rights will be:
Location of Les Echos entities
- – The companies comprising the Les Echos UES and their employees will continue to be located in the current premises at 16 rue du 4 septembre, Paris (2nd arrondissement) for at least 36 months following the sale.
Works council budget
– The works council’s budget for social and cultural activities will be maintained for five years at 3% of total payroll cost, provided said budget takes into account any undertaking from the employer to take over social activities currently managed and financed by the works council (including medical insurance).