Spain roils defence merger backed by Dan Loeb’s Third Point
Aspiring national champion Indra’s mooted takeover of EM&E dogged by questions over role of Escribano brothers
Spain has thrown an obstacle into the path of a defence takeover backed by US hedge fund billionaire Dan Loeb, saying it cannot take place until two brothers resolve conflicts of interest over the companies involved.
Spain’s state holding company, which owns a stake in defence giant Indra alongside Loeb, sent a letter to the company expressing “concern” about conflicts of interest dogging a potential acquisition of weapons manufacturer EM&E. Loeb’s Third Point hedge fund acquired a small stake in Indra this year and supports the deal.
Ángel and Javier Escribano, pillars of the Spanish defence sector, are the respective chairs of Indra and EM&E and own stakes in both companies. The Spanish state is Indra’s biggest shareholder with 28 per cent.
Madrid wants to turn Indra — a radar and sensor specialist — into a European defence champion that can benefit from a surge in military spending spurred by the Ukraine war and the Trump administration’s insistence that Europe take more responsibility for its defence.
Third Point bought its stake in Indra to capitalise on the defence spending boom and sees the acquisition of EM&E as “critical” to boosting its manufacturing, said people familiar with the matter.
But Spain’s leftwing government is uneasy over the roles of the Escribano brothers — founders and sole shareholders of EM&E, which also owns 14.3 per cent of Indra. They both have seats on Indra’s board and Ángel was appointed as chair last year.
Sepi, Spain’s state holding company, said in a filing late on Wednesday that it had sent a letter to Indra conveying “its concern about the impact that the conflict of interest is having on the analysis of the transaction, despite the mitigation measures that have been put in place”.
It added: “Sepi has requested that the conflict be resolved in order to continue analysing the transaction and to adopt a decision that is as advantageous as possible for Indra.”
Sepi declined to comment on Spanish press reports that said its preferred solution was for Ángel Escribano to step down as Indra’s chair. The government approved his appointment in January 2025.
Indra shares dropped 4 per cent on Thursday, trimming its market value to €9.7bn.
Third Point has not revealed the details of its stake, though it would be obliged to disclose any holding greater than 3 per cent.
In a letter to Indra’s board in February, Loeb urged it to seal the takeover of EM&E “without further delay” even as he acknowledged the reports on potential conflicts of interest.
A combination of the companies “is clearly value-enhancing and aligned with the interests of all stakeholders, including shareholders, employees, customers and the Spanish state”.
While some shareholders have argued that the deal would align the interests of the Escribano brothers with those of the Spanish state, Sepi dismissed that claim in its own letter.
“Sepi has stated that any potential transaction with EM&E should not be conceived as a means of resolving the conflict of interest, nor should it be influenced by it. Rather, this conflict should be resolved before proceeding with the analysis of the transaction,” it said.
In an attempt to quell conflict questions, Ángel Escribano has recused himself from all discussions about EM&E at Indra. His brother has also excluded himself from Indra board debates on the subject. Indra chief executive José Vicente de los Mozos is leading the push for the deal.
EM&E’s signature products are weapons systems for tanks that combine high-calibre gun barrels with cameras and software for identifying targets and precision firing. It reported sales of €488mn and ebitda of €195mn last year.
EM&E’s capacity to manufacture heavy equipment would fill a gap at tech-oriented Indra, making the strategic logic of the deal “compelling”, Loeb wrote.