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The Government approves that Sepi buy up to 10% of Telefónica and be the largest shareholder

The Government has approved today in the Council of Ministers that Sepi buy 10% of Telefónica.

Sepi, the state body controlled by the Ministry of Finance, will take up to 10% of Telefónica’s capital, making it the largest shareholder of the telecommunications operator – ahead of Caixa, BBVA and the Saudi STC. in what represents a partial renationalization of the operator, which was totally private since 1997, when the PP Government of José María Aznar completed the privatization initiated by the previous PSOE Government. This has been communicated by the State Society of Industrial Participations to the CNMV in a statement in which it states that “the Council of Ministers in its session today has agreed to order the State Society of Industrial Participations (“SEPI”) to carry out the acquisition of up to 10% of the share capital of the company Telefónica. Telefónica is a leading company in the field of telecommunications both in Spain and internationally. It develops a set of activities that are of crucial relevance for the economy, the productive fabric, research, security, defense and, ultimately, the well-being of citizens”.

Offer shareholder stability

Sepi’s statement also points out that “with a vocation for permanence, Sepi’s participation will provide Telefónica with greater shareholder stability so that the company can achieve its objectives and, therefore, will contribute to the safeguarding of its strategic capabilities. Sepi will proceed to carry out the procedures and actions that allow the process to be launched to, minimizing the impact on the price, complete the acquisition of the necessary volume of shares.”

Knock for the Ibex 35

Sepi’s decision is an unprecedented wake-up call for the Spanish business scene since it is one of the largest private companies in Spain and among the largest in the Ibex 35.

The entry of Sepi is related to the recent announcement of the entry into the capital of the Spanish operator of the Saudi operator STC, controlled by the sovereign fund of the Arab country. STC announced at the beginning of September that it controlled 4.9% of Telefónica’s capital and that, in addition, it had another 5% in derivatives, acquired by Morgan Stanley, which would allow it to reach 9.9% of the capital.

STC’s entry into the capital does not require, for the moment, authorization from the Government, as long as it does not exceed its current participation and does not intend to obtain representation in the company. In fact, STC has not yet notified the Government of its acquisition, so the due authorization process has not been put in place.

As Telefónica is one of the main contractors of the Ministry of Defense, the rule establishes that the Government must authorize entry whenever they want to exercise political rights, that is, vote in the board or intend to appoint a member of the board of directors. .

2,050 million

At the current trading price at the close of today, Tuesday, Telefónica’s stock market value is 20.5 billion euros, so a stake of up to 10% would cost, at the current price, 2.05 billion euros. Although it is not easy to weigh the impact of the news on the price, since the announcement that Sepi was studying the entry into the capital of the operator on October 30, the price, which stood at 3.65 euros, has lost 2.46% to 3.56 euros at which it closed yesterday. In general, the markets do not receive well the news that is related to greater interference by the State in the management of private companies, as has consistently happened, for example, in the case of the technology and defense company Indra.

STC Authorization

The confirmed decision to take a 10% stake fuels the theory that the Government would be willing to authorize the presence of the Saudi operator in the capital of the Spanish telecom company. That is, it would be a way to partially neutralize the influence of the Saudi group, which depends on that country’s sovereign fund (Public Investment Fund, PIF), without having to totally or partially veto the operation, which would mean confronting the Saudi state, one of the largest suppliers and exporters of global hydrocarbons. In reality, in order to claim a member on the board, a shareholder would have to prove a participation of 6.66% of the capital, since currently the board is made up of 15 members.

Therefore, theoretically, the presence of the State with 10% of the capital should allow it to appoint a single member on the board of a total of fifteen members.

However, both CaixaBank – which has a direct 3.5%, although Criteria has another 2.4% – and BBVA (4.87%), its two historical reference shareholders, each have a vice president: Isidro Fainé in the case of CaixaBank and José María Abril in that of BBVA. BlackRock, which has 4.48%, does not have a director.

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