TheChek News Flow

José María Álvarez-Pallete has alerted the board of directors of Telefónicaand its closest team to the intention of an international hedge fund to propose changes in management and capital. According to confirmed official sources of the operator, the first executive of the telecommunications group has ordered to track in recent weeks the taking of positions by Elliott Management Corp , the activist fund of tycoon Paul Singer that has caused the change of the CEO and of the strategy of Telecom Italia.

The same sources point out that the first information about the alleged interest of Elliot Management to take advantage of Telefónica's stock market crash came during the summer, when the price of the first telecommunications company in Spain lost seven euros per share. At that time, Pallete met in person with numerous institutional investors present in the capital of the company to know first hand the reason for the sharp decline in the stock market. In addition, he ordered the strengthening of the investor relations team to warn of potential short-term movements of vulture funds that were betting on the downside against the company.

After the concern of BBVA, the first shareholder of the teleco, the concern about the stock depreciation officially reached the board of directors in September , in which Pallete had to explain what had been the inheritance received from his predecessor, César Alierta, and the decisions he had adopted to value the group. After reassuring the governing body and getting them to close ranks, Pallete continued with the investigation into the possible interest of some activist fund for questioning the group's strategy and asking the management team for an explanation.

Telefónica's investigation led to suspicions that Elliot Management Corp, the most aggressive activist fund in the market (it has just invested 1,000 million euros in the French group Pernod Ricard ), was exploring the alternatives to enter Telefónica's capital if it could get support. of other reference shareholders. According to the same sources, the hedge fund contacted former senior executives of the operator to obtain accurate information on the situation of the company, a move that put Pallete even more alert.

These exejecutivos have been Ramiro Sánchez de Lerín , who was general secretary of the council and knowledgeable of the great secrets of the house , and Santiago Fernández Valbuena, former head of corporate development who once bid to be named successor of Alierta. The Confidential has tried without success to know the version of Sánchez de Lerín, who left Telefónica last year with an indemnity of 11.35 million euros.

For his part, Fernández Valbuena, who also received a millionaire compensation for leaving the group, has assured that his current job is to manage his investment fund in Brazil, where he was CEO of the Spanish subsidiary, and EBN Banco , the small entity acquired from several savings banks. Asked insistently whether he has maintained contact or relationship with Elliot, he has responded that he does not want to "talk about that matter." For his part, Elliot's official sources have declined to comment on this information.

The tracking that has made the team of Pallete in recent weeks has not detected current take of participation of Elliot Management Corp, which manages about 30,000 million dollars. His last big conquest was Telecom Italia, of which he controls almost 9% of the capital and in which he has maintained a tough confrontation with his main shareholder, the French Vivendi. The last decision of the board of the Italian operator was the replacement of the CEO at the end of last November.

An acquaintance of Fainé

The hedge fund has also had an active position in The Bank of East Asia, the Chinese bank of which Criteria , the investment arm of La Caixa, is a leading shareholder (17.59% of the capital). Paul Singer proposed at the beginning of the year to the board of directors to sell the financial institution and accept an offer to buy, which was opposed by Isidre Fainé and the rest of the members of the governing body. Criteria and CaixaBank are currently benchmark shareholders of Telefonica, of which they jointly control 6.14% of the capital, so they know first-hand how Elliot, owner of the historic AC Milan football club, acts . Fainé is one of the great supporters of Pallete.

Telefonica has accumulated a 4.7% drop in the stock market so far this year. But at the end of September came to register a decrease of 18% , when it fell to 6.78 euros, minimum in almost 20 years. The price has recovered 14.15% of its value in the heat of the good results of the third quarter and the improvement of the estimates for the whole year. However, shareholders have lost a third of their value in the last three years, period in which the dividend has been reduced by half.

The company announced last night the appointment of Eduardo Navarro as the new technical general secretary, a position of new responsibility that will cover matters related to legal, regulatory and communication areas. The appointment of Navarro, CEO of Telefónica Brasil, marks the departure as head of institutional relations for José Luis Gómez Navarro after two years in office. The man of confidence of Pallete will continue in the short term in the group in the department of special operations.