Saturday, June 25

ACS-Iberdrola: a war in the courts

This Tuesday the president of Iberdrola, Ignacio Sanchez Galan, you must declare as accused for the orders of the electric company to the Cenyt company, linked to former commissioner José Manuel Villarejo, in the framework of the so-called Tandem case. In the electricity company they are convinced of the existence of “a very powerful black hand” that pulls the strings against its president. Among the documentation in the hands of magistrate Manuel García Castellón are notes in the former commissioner’s agenda and a report by him that would suggest that it was Florentino Perez, the president of ACS and of Real Madrid, the one who would have tried to spy to the president of Iberdrola.

All this mess, with sewers of the state in between, began to take shape in 2005 when the white president became the 22.5% of Unión Fenosa that Banco Santander sold to him with the aim of getting rid of the industrial portfolio after merging with Central Hispano. Pérez dribbled in this operation to Amancio Ortega himself, the owner of Inditex who, along with other Galician businessmen had agreed with the then president of the bank, Emilio Botín, to buy that package at 30 euros per share. But at the last minute Florentino Pérez appeared with an offer of 33 euros per title and an operation similar to what was done in his day with Dragados: a takeover without having to launch a takeover bid for 100% of the capital. At that time, construction companies were swimming in liquidity and sought to diversify in order to make the most of what they had earned during the golden age, especially in regulated businesses, such as energy. It was around those years when, for example, Sacyr tried to rob BBVA, another operation included in the Tándem case with former commissioner Villarejo among the protagonists; and also entered Repsol.

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Former commissioner Jose Manuel Villarejo, before testifying in commission in Congress. David Castro

Go for Iberdrola

But with Unión Fenosa, the third electricity company in the country, of which it came to control 45%, it was not enough for Pérez. And a year later, in 2006, he directed the point of view towards Iberdrola. This company could acquire redundant assets from the takeover bid that Gas Natural (today Naturgy) had launched for Endesa, an operation that caused a business and political earthquake which ended in 2007 with the electric company in the hands of the Italian Enel with Acciona as an ally.

ACS began to buy shares of Iberdrola, a company that, unlike Gas Natural, with La Caixa and Repsol, lacked a relevant controlling shareholding nucleus. The landing of ACS was good for Sánchez Galán to avoid scares like that of Endesa. The surprise (or annoyance) for the builder came when she showed all her cards and Sánchez Galán vetoed his entry to the board of directors, with the argument that it was competition (Unión Fenosa). To command and promote a merger with Unión Fenosa, he pushed him to launch a takeover bid for 100% of the capital, something that ACS could not afford.

Florentino Perez. EP

Florentino Pérez, an entrepreneur unaccustomed to losing and nothing willing to be Sánchez Galán’s lifesaver without compensation such as having control over the electricity company, for which he even considered a president: Pedro López Jiménez, a man of his utmost confidence and at that time president of Unión Fenosa; he went into a rage. And he launched to buy more shares and even became an ally with the French EDF.

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With legal disputes, delays and others, in 2008, with the clouds of the financial crisis already on the horizon, ACS sold its package in Unión Fenosa to Gas Natural and the company controlled by La Caixa also launched a takeover bid with which it absorbed the third electricity company. But neither did the president of Iberdrola give up, an executive with long experience and who, before the electricity company -which he entered in 2001 as executive vice president and CEO and rose to executive president in 2006- was the CEO of Airtel ( then Vodafone); and argued that the construction company had a division of renewables and, therefore, was still a competitor. At the 2010 Iberdrola shareholders’ meeting, the battle raged by preventing the company from having two directors for ACS and limiting its voting right to 3% as a result of a change made in the statutes of the electricity company.

The president of Iberdrola, Ignacio Sánchez-Galán. EP

Over time, ACS had to sell some of its jewelry, like 26% of Abertis (which today controls again with the Italian Atlantian). The outbreak of the financial crisis of 2008, with the collapse of the stock markets, forced him to liquidate positions, since a large part of his holdings were through financial instruments, expensive and without voting rights. All this had caused it losses of almost 2,000 million in 2012, the pressure from the banks and the anger of its relevant shareholders such as ‘los Albertos’ or the March family, through Corporación Financiera Alba who, as soon as they could, left the boat. The attempt to control Iberdrola ended, but not the battle between Florentino Pérez and Ignacio Sánchez Galán, which is now still in court with espionage stories included.

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