The Government is studying imposing conditions on the acquisition by Saudi Telecom (STC) of a 9.9% stake in Telefónica similar to those imposed in previous operations, such as limits on the sale of assets and the payment of dividendsas reported by Bloomberg, citing a source familiar with the project.
The provisions could include some of those applied in 2021 to the purchase of 23% of Naturgy by the Australian fund IFM Global Infrastructure.
These conditions, for a period of five years, included support for certain corporate policies, such as investment in projects considered important for the nation, the maintenance of the headquarters in Spain and the majority of the staff in the country. The Government also imposed a “prudent” dividend policy“, compatible with Naturgy’s investment policy linked to the energy transition, as well as a strategy of indebtedness aimed at maintaining the investment grade credit rating and not exceeding the ratios set by the CNMC. IFM also had to refrain from delisting the company’s shares from the stock market. nor support any sale or divestiture that implies the loss of control over the subsidiaries.
Waiting for a formal request
This same Monday, at the press conference after the meeting of the Council of Ministers, the acting first vice president Nadia Calviño, reiterated that the Government is following “very closely” the entry of STC into the shareholding of Telefónica, although she indicated that The Saudi group had not yet sent any official notification to the Executive to request its authorization.
“The truth is that there has not been no official notification and therefore no specific procedure has been initiated regarding this operation. We are, as it could not be otherwise, closely following all the developments that may occur in this context, but there is no change and no news in this area,” said Calviño.
“The limit for foreign investment is the protection of our national interests,” said the acting President of the Government, Pedro Sánchez, on September 15 at a business event at the CEOE headquarters. “We will guarantee that any foreign investment does not transcend the limits that entail undue influence on strategic companies or entail access to critical technologies,” he added, after reiterating that the Executive was “determinedly analyzing the operation.”
The legal framework
On September 5, STC announced, after the market closed, that it had acquired 9.9% of Telefónica’s share capital. Specifically, 4.9% through shares and the remaining 5% through financial instruments.
According to the regulations in force in Spain regarding foreign investments in strategic listed companies, The Executive must give permission to non-EU investors who intend to acquire more than 10% of a company of this type. However, this threshold is lowered to 5% in the case of companies with interests in the field of national defense, such as Telefónica.
When it announced the operation, STC explained that its intention was to exercise the political rights in the company corresponding to its 9.9% stake in the capital.
Thus, STC must address the Government and explain its intentions within the company (such as whether it wants a seat on the board of directors, for example) to receive the approval or not of the Executive, a notification that, as Calviño explained, has not yet been received. arrived.
Even without reaching 5% of the capital of a company linked to national defense, a foreign investor must make it clear that his participation does not allow him to be part, either directly or indirectly, of its board of directors. Otherwise, the operation would also require permission from the Government, even if it does not exceed 5% of the capital, as established by the royal decree on foreign investments approved on July 4, 2023, which came into force on September 1.
Telefónica board meeting
Related news
The board of directors of Telefónica will meet this Wednesday, September 27, to address, foreseeably, the entry of the Saudi group STC as the main shareholder of the Spanish operator.
The meeting of the board of directors is of an ordinary nature – it was scheduled before the emergence of STC – and, although the items on the agenda have not been revealed, it is expected that the movement of STC in Telefónica will focus the meeting, given that the operation caught the company by surprise and its highest governing body was not aware of it, which, according to various sources, caused the discomfort of some directors.