Battle over €1bn stake sale escalates at Spain’s El Corte Inglés
The boardroom battle at El Corte Inglés has intensified, after a director and minority shareholder accused the Spanish department store chain of being “opaque” and called for a broader shake-up at the retailer.
The complaint is part of an escalating internal struggle over the sale of a 10 per cent stake to a prominent Qatari investor for €1bn, by way of a convertible loan. Ceslar, a family investment vehicle that itself owns just under 10 per cent of El Corte Inglés, says the deal undervalues the group, includes highly unfavourable conditions — and is designed to cement the power of current management.
Carlota Areces, who represents Ceslar on the board, told the Financial Times: “[The stake sale] damages the group, it undervalues the group, both when you look at the current situation and when you look at the medium term.”
Ms Areces voiced particular alarm over a series of penalty clauses that she said were likely to leave the buyer with a much larger stake in the group than publicly stated.
“There is a very aggressive business plan, promising 12 per cent annual growth in ebitda [earnings before interest tax, depreciation and amortisation] over the next three years. These are conditions that are impossible to meet, and there are penalty clauses. In the worst case, he will get 15.25 per cent of the company for his €1bn investment, not 10 per cent,” she said.
Ms Areces also took aim at a contentious commission paid by El Corte Inglés to an unknown company in connection with the deal. Neither the identity of the recipient nor the amount of money paid have been disclosed. According to unconfirmed reports in the Spanish media, the payment totalled €17.5m.
“The question I have is: who received this commission?” she said, pointing out that the name of the company or adviser was not provided to board members. “I asked, and I was not given an answer.”
The investor buying into El Corte Inglés is Sheikh Hamad bin Jassim bin Jabr al-Thani, a former Qatari prime minister and previous head of the Qatar Investment Authority. His foray into the Spanish retail market, agreed last month, follows similarly high-profile deals to take a €1.75bn stake in Deutsche Bank and the acquisition of Heritage Oil for £924m. Both those deals were struck last year.
Hit hard by the recent crisis in Spain, El Corte Inglés is likely to be one of the main beneficiaries of the economic recovery and bounce in consumer spending. Aside from the department stores, the group controls a chain of supermarkets and hypermarkets, travel agents and opticians. With staff numbering more than 80,000, it is one of Spain’s biggest private-sector employers.
Ms Areces said El Corte Inglés was indeed seeing an increase in sales and margins, but insisted that the group needed a broader shake-up. “This has always been a very opaque company,” she said. “We have to say adiós to the old way of doing things. We need rejuvenation. We need a change on the board.”
El Corte Inglés declined to comment.