March 10, 2013 8:23 pm

Spain raises takeover barriers

A fear that troubled Spanish companies could fall prey to opportunistic foreign takeovers has prompted Madrid to build new legal barriers around the country’s strategic industries in the past year.

After the Argentine government’s seizure of Repsol’s YPF unit last year, leaving the Spanish oil group vulnerable to a takeover attempt, Spain passed a reform to prevent bidders from making low offers for companies that had suffered expropriations.

At the same time Madrid also reversed a law banning limits on voting rights for large shareholders in some of the country’s largest companies, such as the power utility Iberdrola.

This means, in the event of an unsolicited approach for a company with the limit, any bidder would be unable to unseat its management through buying up a large stake, raising the barriers to make a successful hostile takeover in Spain.

Critics of the changes have argued that a desire by the Spanish government to protect its leading companies after they have suffered from sharp share price falls during the country’s financial crisis is unnecessarily protectionist, and will hamper foreign investment into Spain.

The Spanish government meanwhile argues that measures must be taken to ensure shareholders in companies that have suffered an extraordinary event – such as an expropriation – are protected.

The issue of caps on voting in Spain gained fame during a prolonged battle between ACS, the construction company chaired by Florentino Perez, president of Real Madrid football club, and Iberdrola. ACS had built up a near 20 per cent stake in Iberdrola, and wanted to gain a seat on the company’s board. Iberdrola rebuffed the builder, and used its voting cap to block it from using more than 10 per cent of its stake to vote at annual meetings.

Spain’s previous Socialist government lifted the laws on voting caps in a law dubbed by the country’s tabloid media as the “Florentino law” but this has now been reversed. The move by Spain to make hostile takeovers more difficult has been followed by France, where the country’s market regulator has recommended that acceptance thresholds are raised after Paris requested ways to avoid undesired foreign bids.

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