By Sarah White and Gwénaëlle Barzic

PARIS (Reuters) -The heir to France’s Lagardere group has ended up with a smaller than advertised stake after a restructuring, further shrinking his sway after he gave up veto powers that protected the firm and its influential media assets from takeovers.

Arnaud Lagardere effectively holds 11% of the conglomerate, not the 14% allotted on paper to his holding company when a previous partnership structure was finally disbanded this week, according to two sources close to the matter and corporate statements.

Lagardere shares closed up 6% at 22.40 euros, accelerating their gains after Reuters disclosed the stake size, traders said. Lagardere was the top riser on the SBF 120 index.

Less than a year out from a French presidential election, Lagardere’s overhaul has made it more vulnerable to a possible takeover that would change France’s media landscape, with Paris Match magazine, a radio station and a Sunday newspaper among some of its prized assets.

The previously unreported smaller stake does not alter the votes Chairman and Chief Executive Arnaud Lagardere gets in the boardroom.

But it is another sign of his weakened hand. Under pressure from personal debts and an activist campaign last year, Lagardere sought allies, eventually bringing on board two of France’s richest businessmen and dealmakers, media tycoon Vincent Bollore and luxury goods billionaire Bernard Arnault, who are now investors with board seats.

“In the end, Arnaud Lagardere negotiated to keep his status more than the economic equation,” one of the sources close to the matter said.

While Arnaud Lagardere previously only held 7% of the company, that stake had special powers attached to it which allowed him to block decisions.

Unravelling that structure as the new investors pushed for more influence gave his holding company the right to double its stake to 14%, but some of those shares are effectively owed to Bernard Arnault, corporate statements show.

The two sources confirmed that Arnault, who already has 7%, is entitled to at least another 3% of Lagardere as part of the firm’s conversion into a joint-stock company, and could claim more shares should he want to cash out of the holding.

The businessman, who runs luxury goods giant LVMH, insisted the Lagardere group mention that entitlement in recent corporate filings, the people added, after becoming disgruntled with how the company’s restructuring turned out.

A spokesperson for Arnault’s Financiere Agache investment vehicle declined to comment.

Bollore and his Vivendi group emerged as the big winners of Lagardere’s overhaul, with a 27% stake and influence at board level.

Three investor and banking sources said that Vivendi was a prime contender to launch a full takeover, especially if other interested parties emerged, and despite fears in French President Emmanuel Macron’s administration about that scenario.

Macron has concerns that Bollore, who is already building bridges between some of Lagardere’s outlets like Europe 1 radio and his CNews TV station, could create a powerful conservative media group that would inundate the airwaves with right-wing views, sources have previously told Reuters.

Spokespeople for Bollore and Lagardere declined to comment.

Macron’s office could not immediately be reached but has previously declined to comment on the matter.

VIVENDI A THREAT?

Bollore has also had an eye on Lagardere’s publishing assets, which include Hachette, sources said last year.

Arnaud Lagardere has so far welcomed the new company set-up, however, saying it would help keep the group intact and centred on developing its core travel retail and publishing activities.

“Vivendi and Vincent Bollore are assets for us and not a threat,” Lagardere told a shareholder meeting on Wednesday.

The 60-year-old was elected for another six-year term on the board, another trade-off for giving up the partnership structure at the once-mighty industrial firm founded by his father.

Some of Arnaud Lagardere’s shares in the Lagardere group are also collateral for a loan he had taken out with Credit Agricole bank, corporate filings show. A source close to Arnaud Lagardere said that debt, originally 164 million euros, was under control. It is not clear how much is outstanding. Credit Agricole declined to comment.

(Reporting by Sarah White and Gwenaelle Barzic, Additional reporting by Mathieu Rosemain and Sudip Kar-Gupta in Paris and Julien Ponthus in London; Editing by Kirsten Donovan and Louise Heavens)

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