ECONOMY ENDESA TAKEOVER: NARRATIVE OF EVENTS · February 3rd, 2006. The Council of Ministers...

ECONOMY

ENDESA TAKEOVER: NARRATIVE OF EVENTS

Jaime García-Legaz, State Economist. Director for Economy and Public Policies at the FAES Foundation

José Luis Rodríguez Zapatero y su asesor económico, Miguel Sebastián

After the Tinell Pact that set out the will to “act from the Regional Government of Cataloniato create Catalan operators in the energy sector”, Gas Natural launched a hostile bid to

take over Endesa. President Zapatero and Solbes (Minister of Economy), approved the mer-ger despite the unfavourable opinion of the Competition court. The Spanish Courts later sus-pended that decision by the Government. Alfedro Perez Rubalcaba, Congress socialist spo-keperson, explained that “Gas Natural’s takeover bid is half the Statute of Catalonia”. E.On

outbid the original offer, but Zapatero rejected it through the “Anti-E.On Decree”, whichmade the European Commission took Spain before the European Court of Justice. Zapaterotoasted with Merkel for a “happy end to E.On’s bid” but his economic adviser and the Minis-ter for Industry were meeting in secret with the top managers of Enel, the Italian state-ow-

ned power utility. Zapatero met with Prodi and it was announced that Acciona and Enel nowcontrol Endesa without having launched any public bid. Endesa ends up split in two and

controlled by the Italian company Enel. The president of the Comisión Nacional del Mercadode Valores (CNMV, Spanish Securities and exchange commission) is forced to resign and dis-closes the pressure on the CNMV from the President’s office during the bid and the suspi-cious personal interests of the deputy president of the CNMV and of Zapatero’s two econo-mic advisers, now facing charges of abuse of power, bribery and influence peddling at the

Office of the Public Prosecutor against Corruption. The Financial Times stated that “the Spanish Government is making a fine mess of things”.

04/05/2007Nº 44

FOTO

: REU

TER

S

papel44ingl:PAPELES 6/6/07 14:09

Narrative of Events● December 14th, 2003. Esquerra Republicana de Catalunya (Catalan Repub-

lican Left, separatists), Iniciativa per Catalunya (Initiative for Catalonia,communists) and the Partido Socialista de Cataluña (Socialist Party of Cat-alonia, PSC) signed the Tinell Pact which stated, in its point eight, that allthree parties undertook to “act from the Regional Government, in concertwith the private sector, to encourage the creation (…) of Catalan operators(…) in strategic sectors (energy)” and “to boost the existence of top-levelbusiness decision centres in Catalonia in the said sectors”. Jose Montilla(Minister of Industry) and Maite Costa (president of the Comite Nacional dela Energia, National energy commission, CNE) took part in its drafting.

● September 5th, 2005. Gas Natural, controlled by La Caixa (Catalonian Sav-ings Bank), launches a takeover bid for Endesa at € 21.30 per share. En-desa rejects it as implying an Enterprise Value far below the true value. En-desa is three times the size of Gas Natural.

● September, 2005. The president of Gas Natural, Salvador Gabarró, stated that“the semen is now in place and in nine months time we’ll see the new baby”.

● October, 2005. It was announced that on December 29th, 2004, La Caixawrote off 6.5 million euros of the debt of the Partido Socialista de Cataluña,on the executive council of which sat the former Minister for Industry, JoséMontilla, and the president of the CNE, Maite Costa. Montilla was alreadyMinister for Industry when the write-down took place.

● October, 2005. Zapatero met secretly with the top managers of La Caixa.Fernández de la Vega (Government vice president) and Solbes stated that“the takeover is a purely entrepreneurial transaction and not political”.Rubalcaba clarified that “the takeover is half the Statute of Catalonia”.

● October, 2005. The Euroconsumo consumers’ association went to court todenounce the anti-competitive effects of the Gas Natural-Endesa merger.

● November 8th, 2005. The Board of the Comisión Nacional de la Energía (CNE)manipulated and altered the report by the technical analysts at the CNE contraryto the acquisition of Endesa by Gas Natural and approved the operation. Thepresident of the CNE, Maite Costa, did not disqualify herself for the vote.

● January 5th, 2006. The Tribunal de Defensa de la Competencia (Competi-tion court, TDC) rejected the merger of Gas Natural and Endesa becauseof its irreversible negative impacts on competition.

● February 2nd, 2006. The president of the Tribunal de Defensa de la Com-petencia, Luis Berenguer, advised the Government to pay no heed to the re-port by the Tribunal he himself chairs and to authorize the merger.

[email protected]

2


● February 3rd, 2006. The Council of Ministers authorized the merger of GasNatural with Endesa. For the first time in history a Spanish Government ap-proved a merger of such characteristics despite the unfavourable report bythe Tribunal de Defensa de la Competencia.

● February 21st, 2006. The German energy group E.On topped the takeoverbid with an offer of 27.50 euros per share, 29.1% more than had been of-fered by Gas Natural and all-cash to boot.

● February 22nd, 2006. Zapatero publicly backed a “national champion”. Afew days later, he was discredited by Solbes, who said he disagreed with thetheory of “national champions” in energy.

● February 24th, 2006. The Spanish Government approved a Royal Decree-Law with urgent measures to extend the remit of the CNE so as to block thetakeover bid by E.On. It was christened the “Anti-E.On Decree”.

● March, 2006. The European Commission informed the Government of Spainthat the “Anti-E.On Decree” was illegal as it breached European Commu-nity laws and ordered its amendment with the threat of taking the matter tothe European Court of Justice. The Spanish Government ignored these warn-ings.

● March 21st, 2006. Commercial Court number 3 in Madrid ordered the in-terim suspension of Gas Natural’s bid for Endesa on the grounds of primafacie indications of breaches of the competition regulations.

● April 21st, 2006. The Supreme Court suspended the resolution adopted bythe Council of Ministers authorizing Gas Natural’s takeover of Endesa, asa precautionary measure because it was felt that there were prima facie in-dications of breaches of the competition regulations.

● April 25th, 2006. The European Commission unconditionally approved thetakeover of Endesa by E.On.

● July 27th, 2006. The CNE approved E.On’s takeover of Endesa with nine-teen conditions and, even though E.On is not present in Spain, it obligedthis company to dispose of 32% of the assets.

● September 12th, 2006. Zapatero toasted German Chancellor Merkel andstated: “(…) the (Spanish) Government wishes and desires a resolution (ofthe takeover) that is satisfactory for the interests of E.On (…)”.

● September 16th, 2006. President Zapatero’s economic adviser, Miguel Se-bastián, met in secret with the managers of Enel, an Italian power companywith a state-held stake of over 31%.

[email protected]

3


● September 25th, 2006. After meeting with the President’s economic adviser,Acciona bought 10% of Endesa for 3,388 million euros.

● September 26th, 2006. The European Commission declared the conditionsimposed on E.On by the CNE illegal and once more demanded the SpanishGovernment amend the “Anti-E.On Decree”.

● September 26th, 2006. E.On raised its bid for Endesa to 35 euros per share.

● September 27th, 2006. The Spanish Government’s Secretary General for En-ergy, Ignacio Nieto, a member of the PSC, met secretly with the managers ofAcciona. This senior figure of the Socialist government offered to Acciona itssupport in the control of Endesa through the stockholding held by the So-ciedad Estatal de Producciones Industriales (State owned companies consor-tium, SEPI) in the power company (2.95% of its share capital) and alsooffered to Acciona the support of the 2% stake in Endesa held by La Caixa.This information was subsequently disclosed by the El Mundo newspaper.

● October 3rd, 2006. The CNE ignored the notification from the EuropeanCommission declaring illegal the conditions imposed on E.On and ratified allof those conditions.

● October 4th, 2006. Zapatero sent the Secretary of State for the Economy,David Vegara, to speak with the managers of E.On.

● November 3rd, 2006. The CNE authorized Acciona to take a stake in En-desa. The El Mundo newspaper later revealed that Luis Albentosa, a mem-ber of the CNE’s Board appointed at the proposal of the PSOE, hadpreviously tipped off a senior manager in Acciona that the CNE was goingto adopt that decision.

● November 4th, 2006. The Ministry for Industry authorized E.On’s purchaseof Endesa with fewer conditions than the CNE, but upholding others.

● December 20th, 2006. The European Commission asked Spain to withdraw“immediately” the new conditions imposed on E.On’s takeover bid for En-desa as these were considered illegal.

● January 24th, 2007. The European Commission announced that it will takethe Government of Spain to the European Union’s Court of Justice becauseof the “Anti-E.On Decree”.

● January 31st, 2007. The European Commission extended the file it hadopened against Spain.

● February 1st, 2007. Gas Natural withdrew from it takeover bid for Endesa.

[email protected]

4


● February 2nd, 2007. E.On raised its offer to 38.75 euros per share.

● February 16th, 2007. The new Minister for Industry, Joan Clos, and Zapa-tero’s economic adviser, David Taguas, met secretly with the Managing Di-rector of Enel, Fulvio Conti.

● February 20th, 2007. Zapatero and the Italian Prime Minister Prodi met inIbiza.

● February 23rd, 26th and 27th, 2007. The UBS merchant bank, acting onbehalf of Enel, acquired 9 million Endesa shares. This information was dis-closed by the El País newspaper on March 5th.

● February 27th, 2007. The Minister for Industry, Joan Clos, stated on the SERradio channel that “the Germans haven’t won”, that he saw “Acciona as hav-ing more chance of succeeding” and foresaw “a Shareholders’ agreement”.

● February 28th, 2007. Enel announced that it had acquired through UBS“in the evening of February 27th, after the market had closed”, a 9.99%stake in Endesa at 39 euros per share, paying out 4,126 million euros. ItsSecretary General, Claudio Sartorelli, stated that “the decision was takenthis very afternoon”.

● February 28th, 2007. The PSOE’s Organization Secretary, José Blanco,stated that “the Minister for Industry has shown he has great intuition, be-cause he had no information (about the Enel deal)”.

● March 12th, 2007. Enel announced that it controlled 24.98% of Endesaand stated its intention to appoint three Directors, despite the fact that cur-rent Spanish legislation prevents foreign state-owned companies from sit-ting on the Board of Directors and limits their voting power to 3% of the sharecapital.

● March 14th, 2007. In the La Razón newspaper, Professor José Barea alertedto the risk that Endesa might end up in pieces.

● March 20th, 2007. Enel and Acciona confirmed that they would launchtheir own takeover bid for Endesa if E.On’s bid fell through.

● March 23rd, 2007. The CNMV allowed E.On to improve its bid and bannedEnel and Acciona from launching any takeover bid for at least 6 months.

● March 27th, 2007. E.On pushed its bid up to 40 euros. Enel and Accionaannounced that they would be offering 41 euros. The Financial Times feltthat “the Spanish Government is acting arbitrarily” against E.On and infavour of Enel.

[email protected]

5


● March 28th, 2007. The European Commission resolves to submit its alle-gations against Spain to the European Court of Justice for breach of the EUregulations.

● March 30th, 2007. The president of Endesa recalled the prohibition undercurrent Spanish legislation for a foreign state-owned company from sitting onthe Board of Directors of a Spanish power utility and that its voting rightsare limited to 3%. He wondered if perhaps the Spanish Government hadn’tsecretly promised Enel that the current legislation would be amended.

● April 2nd, 2007. E.On reached an agreement with Enel and Acciona towithdraw its bid for Endesa in return for 10,000 million euros in assetsheld by the power company in France, Italy and Spain. Solbes described thedismantling of Endesa as “a re-location of assets”. Miguel Sebastián, for-mer President’s economic adviser and the PSOE’s candidate for Mayor ofMadrid at that moment stated that the outcome of the agreement, a piece-meal renationalized Endesa in foreign hands, “is positive”. The FinancialTimes affirmed that the “Spanish Government has acted like a buffoon” inthe bid.

● April 3rd, 2007. Manuel Conthe, President of the CNMV, announced hisresignation from the CNMV after he is allowed to speak before Parliament.

● April 4th, 2007. The European Competition Commissioner spokesperson,Jonathan Todd, declared that the European Commission will carry on withits lawsuit against Spain in the European Court of Justice.

● April 6th, 2007. Vice President De la Vega threatened Conthe with dis-missal, something the legal experts consider would be illegal if carried out.Solbes remains silent.

● April 24th, 2007. The president of the CNMV revealed pressure on theCNMV and interference by Miguel Sebastián and David Taguas, Zapatero’seconomic advisers, in key decisions regarding the takeover.

● April 27th, 2007. The Office of the Public Prosecutor against Corruption re-ceived a legal complaint against Miguel Sebastián, David Taguas and Car-los Arenillas (Vice president of the CNMV) accusing them of abuse ofpower, bribery and influence peddling.

Endesa, before and after the takeover bidPrior to the takeover bid, Endesa was a privately-held company controlled bySpanish shareholders. After the takeover bid, Endesa may be cut up into twoparts, one in the hands of a German operator and the other controlled by an Ital-ian state-owned company (75% of the share capital).

[email protected]

6


The institutions after the takeover bidThe Comisión Nacional de la Energía● The Board of the CNE altered the report drawn up by its technical personnelon the Gas Natural-Endesa merger and radically changed its conclusions andrecommendations. ● The CNE’s decisions hindering the E.On takeover bid have caused Spain tobe brought before the European Court of Justice for breaching Community law.

The Tribunal de Defensa de la Competencia (TDC)● Its president, Luis Berenguer, advised the Government to pay no heed to thereport by the Tribunal and authorize Gas Natural’s bid.● For the first time, a Government overrules the TDC to approve a significant merger.

The Comisión Nacional del Mercado de Valores● Its president, Manuel Conthe, was obliged to resign in the face of the Gov-ernment’s interference.● Conthe revealed that most of the supposedly independent members of theBoard of the CNMV act in accordance with the instructions from the Presi-dent’s office.● The Vice president of the CNMV, Carlos Arenillas, is facing a lawsuit for abuseof power, bribery and influence-peddling at the Office of the Public Prosecutoragainst Corruption for his actions during the takeover bid.

The Government of Spain● Its decision to authorize the Gas Natural-Endesa merger was suspended bythe Courts.● The Kingdom of Spain has been taken to the European Court of Justice bythe European Commission for breaching EU regulations in connection with theGovernment’s decisions.

Spain’s reputation in the international pressFinancial Times, The Wall Street Journal and The Economist have used the fol-lowing expressions with respect to the Spanish government’s behaviour in thetakeover bid: “It has acted like a buffoon”, “interventionist”, “arbitrary”.

The Spanish Government and the takeover bidZapatero, De la Vega and Solbes have repeatedly stated that “the takeover isa solely entrepreneurial issue”. But Rubalcaba clarified that “Gas Natural’stakeover of Endesa is half the Statute of Catalonia”.

Zapatero, his economic advisers Sebastián and Taguas, Industry ministersMontilla and Clos, Secretary of State for Economy, Vegara, General Secretaryof the Ministry of Industry, Nieto, and former minister Solchaga have met on atleast eleven occasions (the ones we know about), most of the time in secret,with the companies involved in the takeover.

[email protected]

7


Zapatero backed “national champions”. Solbes discredited him and rejectedthe theory of national champions.

Zapatero’s two economic advisers, Miguel Sebastián and David Taguas, arefacing a lawsuit for abuse of power, bribery and influence-peddling at the Of-fice of the Public Prosecutor against Corruption for their actions during thetakeover bid.

General Secretary of the Ministry of Industry, Ignacio Nieto, a member ofthe PSC, met secretly with the managers of Acciona to offer them support inthe control of Endesa through the stockholdings of the SEPI and La Caixa.

The regrettable role played by SolbesIn the wake of this string of blunders, if there is anyone who has lost all ves-tiges of respectability it is the current Minister of Economy (others, such asMiguel Sebastián or David Taguas, could never lose theirs as the first requisiteis to have credibility). Solbes has ruined Spain’s prestige in the European Union(Being the PSOE’s slogan in the last European elections “Back to the heart ofEurope”?). He has torpedoed the system of independent regulators, built upwith such effort over the years. The Tribunal de Defensa de la Competencia isnow discredited, the Comisión Nacional de la Energía has lost all its credibil-ity and the CNMV is irredeemably tarred as an institution in the hands of sup-posedly independent councillors but actually following the instructions of La Mon-cloa or the minister who appointed them. With his deplorable role in thistakeover bid, Solbes has undermined the good standing of the Spanish econ-omy and its institutions on the international financial markets, provoking ex-tremely severe criticism in the international economic press. His noisy silence,on occasions, and his active intervention, on others, has made Solbes a nec-essary abettor in the enormous loss of institutional credit suffered by Spain inthe last year and a half. All bedecked in outstanding cynicism to the pointwhere, even after the “spectacle” in which he has played a leading role and theclarifications provided by Manuel Conthe, he has said that “the takeover bid hasat all times been a purely entrepreneurial transaction”.

[email protected]

8

FAES Fundación para el Análisis y los Estudios Sociales no se identifica necesariamente con las opiniones expresadas en los textos quepublica. © FAES Fundación para el Análisis y los Estudios Sociales y los autores. Depósito Legal: M-42391-2004

[email protected]


ECONOMY ENDESA TAKEOVER: NARRATIVE OF EVENTS · February 3rd, 2006. The Council of Ministers...

Documents

Transcript of ECONOMY ENDESA TAKEOVER: NARRATIVE OF EVENTS · February 3rd, 2006. The Council of Ministers...