The operation occurs in response to the entry into the capital of the Saudi STC and is valued at 2,000 million euros. The Government justifies the purchase by “ national interest ” and “ shareholding stability ”
The Government approved on Tuesday in the Council of Ministers that the State Society of Industrial Participations (SEPI), the industrial arm of the State, acquire up to 10% of Telefónica’s capital, which would make it the operator’s first shareholder, as reported by state society through a relevant fact sent to the National Securities Market Commission. When the operation is completed, the State will return to Telefónica’s capital 26 years after its complete privatization, You will be entitled to one or two members on the board of directors and will become the first shareholder ahead of BBVA, CaixaBank, Saudi Telecom Company (STC) and the BlackRock fund. At market prices, this share is valued at around 2,000 million euros. The Executive has justified the operation due to the strategic nature of the Spanish multinational and the contracts it maintains in the defense area.
The decision comes after the entry into the capital of the STC operator, the Saudi state operator, who in September he announced the purchase of 4.9% of the capital with an option to another 5% through convertible financial instruments. The movement then caused a financial and political earthquake. He caught both the Telefónica board of directors and the government by surprise, which must give the green light for the Saudis to complete the 9.9% take%. Since then, several members of the Executive, with the Vice President Prime and Minister of Economy, Nadia Calviño, at the helm they have promised to apply “ all the necessary mechanisms ” to defend “ the strategic interests of Spain ”. And among those mechanisms, the possible entry of SEPI was already admitted at the end of Octoberin the capital.
Telefónica’s board of directors has not ruled after the announcement of SEPI. And, its top shareholders — BBVA and CaixaBank together with Criteria, the investment arm of the Foundation “ la Caixa ” — have also made no comments.
“ Shareholder stability ”
“ With a vocation for permanence, the participation of SEPI will provide Telefónica with greater shareholder stability so that the company achieves its objectives and, therefore, It will contribute to safeguarding its strategic capabilities ”, SEPI said this afternoon in the statement to the CNMV at the close of the stock market session.
In it, the state company clarifies that it will proceed “ to carry out the procedures and actions that allow the process to be launched to minimize the impact on the contribution, complete the acquisition of the required volume of shares ”. Telefónica’s price closed in the session on Tuesday at 3.56 euros per share, after falling 0.78%. The capitalization of the company is around 20,000 million euros, so the purchase of that 10% will mean a disbursement of 2,000 million euros, very similar to the 2.1 billion that STC paid for its 9.9% in September.
Since the privatization of large public companies such as Endesa, Tabacalera, Argentaria, Iberia or Telefónica itself was completed, mainly in the eighties and nineties, no government had carried out a movement of this draft, both financially and strategically. In this sense, the Ministry of Finance, on which SEPI depends, has appealed to undertake the operation at “ national interest ” and the need to provide the company with a “ shareholding stability ”.
Presence in national security and defense
“ The presence of a public shareholder in Telefónica will reinforce its shareholder stability and, consequently, to preserve strategic capacities of essential importance to national interests ”, Hacienda has indicated in a press release. “ Telefónica is one of the main companies in the country, leader in the telecommunications sector and key in other strategic areas. The company is decisive for its industrial capacities and areas of knowledge, since it carries out activities relevant to the economy and the productive fabric, including those related to security and defense ”, adds the statement from the department headed by María Jesús Montero.
Hacienda also highlights that Telefónica “ is also present in all the technological areas of the Ministry of Defense and provides the telecommunications services and infrastructures of the Comprehensive Defense Information Infrastructure in national territory and in military operations abroad, therefore, having a solid position in this sector ”.
Along the same lines, Calviño has taken advantage of his presence in the Senate to point out that the operation seeks to give stability to the company in its strategic objectives and its shareholder structure, and it is “ in line with other large European countries such as France and Germany, which have or are even increasing their public participation in large telecommunications operators ”. The German State owns 13.8% of the capital of Deutsche Telekom; French, 13.4% Orange, and Italian adopted an agreement in August to increase to 20% your participation in the company that groups Telecom Italia’s fixed telephony assets.
From a financial point of view, SEPI will not be able to undertake the operation with its own funds, so you will have to ask the State for a loan. In 2022, it lost 65 million and barely had a box of 454.69 million. In addition, its ability to borrow is limited by the State Budgets and, by 2023, the ceiling is 320 million, so it will require a special authorization from the Ministry of Finance. In addition, SEPI must be very cautious in buying shares so as not to trigger the price and, with it, increase the cost of the operation. For this, the state company, as it has already admitted to the CNMV, plans to make small acquisitions that are long over time, similar to how it increased its participation from 18% to 28% in Indra.
Once the purchase of SEPI is completed, the Government will have free hands to authorize the taking of the additional 5% of Telefónica’s capital by STC, that it has not yet processed the permit before the Ministry of Defense to reach 9.9%. The operator, owned by the Saudi sovereign fund PIF, will then be able to apply for at least one seat on the board of directors.
Source: El Pais