Spain’s cajas reshape corporate landscape
The Financial Times
Ongoing restructuring of Spain’s financial system is likely to trigger the largest redistribution of holdings in some of the country’s biggest companies since privatisation in the 1980s and 1990s.
Academics, analysts and bankers argue that the amount of new capital required by Spanish companies during the next two years, combined with the radical financial surgery needed to save some of its savings banks, could dramatically reshape Spain’s corporate landscape.
The savings banks – known as cajas – are judged by the Bank of Spain to need €15bn ($22bn) in fresh capital to mend balance sheets ravaged by a decade of property-related lending now suffering from the country’s real estate bust.
Alongside the option of taking government rescue money, or raising fresh capital by stock market listings or by private investment, many cajas are preparing to offload industrial holdings.
The total holdings of Spanish banks and cajas in listed Spanish companies are estimated at about €40bn, including large stakes in national champions such as Telefónica, Repsol and Iberdrola.
“Spain needs to raise 3-4 per cent of its GDP in financing its current account deficit – or €30bn-€40bn a year; this implies selling Spanish assets to foreigners, as the other way would be to cut consumption or investment by the same amount, and [that] would produce a new recession,” says Ignacio de la Torre, a professor at IE Business School.
The need for foreign investment has led to a parade of private equity groups, hedge funds and sovereign wealth funds descending on Spain seeking bargains.
Last month, the emir of Qatar reciprocated an official Spanish state visit to the Gulf state this year by visiting Madrid and declaring the continued interest of Qatari investment groups in the Spanish banking sector.
In March, Qatar Holdings, one of these groups, made a surprise 6 per cent investment in Iberdrola, Spain’s largest power utility, and it has said it is eyeing further investments in the telecoms and banking sectors.
Other recent purchasers from the Middle East include International Petroleum Investment Company, the Abu Dhabi sovereign wealth fund, which paid €3.7bn to buy shares in the oil company Cepsa that it did not already own, and Royal Emirates Group of Dubai, which purchased Getafe football club for about €90m.
Further investment by foreign buyers could begin to unravel a complex web of political and business relationships that have enabled cajas to exert a degree of control over companies that are viewed as strategically important.
Of the €40bn of listed equity controlled by banks, three-quarters is in the hands of three of the largest groups, Santander, BBVA and La Caixa.
Many of these holdings date back to the privatisation of companies such as Repsol, when government welcomed Spanish banks buying shares in order to maintain a degree of national control.
“The government wanted to retain some influence in the privatised companies and one way to do this was through Spanish banks,” says Professor Eduardo Martínez-Abascal of IESE Business School.
But the bulk of the remaining €10bn controlled by cajas now sits within the recently formed Bankia, a fusion of seven cajas including Caja Madrid.
Bankers working in Spain view the likelihood as high that Bankia will divest some of its holdings, which include 6 per cent of Iberdrola, and 12 per cent of the International Airlines Group, the merger of British Airways and Iberia.
The fate of some of the higher-quality holdings will be sensitive. ACS, the construction company chaired by Real Madrid president Florentino Perez, is involved in a long-running and acrimonious battle to win board room representation at Iberdrola, of which it holds 18 per cent.
The probable availability of Bankia’s 6 per cent stake, and the possibility of the Basque caja BBK relinquishing its 6.6 per cent holding in the utility, means the stability of Iberdrola’s share register appears vulnerable