Spain Weighs Blocking IFM’s 5 Billion-Euro Naturgy Bid

The Spanish government is leaning toward blocking an attempt by an Australian asset manager to purchase a significant stake in Madrid-based Naturgy Energy Group SA, a leading utility that’s deemed a strategic asset.

Approving IFM Global Infrastructure’s 5 billion-euro ($6 billion) bid to buy a 22.7% stake in Naturgy would mean handing over control of a vital company to a group of foreign investors at a time of exceptional economic difficulty, according to a person familiar with the government’s thinking.

The economic impact of the pandemic means special safeguards are needed to protect national companies and knowledge, as demonstrated by recent decisions by France, said the person, who asked not to be identified because the discussions within the government are private.

Madrid’s decision comes as European countries weigh how much national backing is needed to help develop and protect local industries. Last month, France blocked a planned takeover of supermarket chain Carrefour SA by Canada’s Alimentation Couche-Tard Inc., citing a need to ensure food sovereignty in a pandemic.

Spokespeople from the Spanish government, IFM and Naturgy declined to comment.

Naturgy dropped 3.21% to 20.48 euros per share at 4:56 p.m. in Madrid, after having declined as much as 5.95% earlier. The shares are up 8% this year.

Strategic Assets

The matter has been discussed informally in Prime Minister Pedro Sanchez’s office and in certain ministries, said the person. No decision has been made and the deal could still be approved. IFM presented documentation last week to the government requesting permission to acquire the stake and the issue will be brought up in the industry ministry and the cabinet.

Spain’s ministry of economic affairs will have a strong say in any decision regarding the IFM bid. But Nadia Calvino, the pro-market minister who also serves as first deputy prime minister, hasn’t taken a position yet. The deal will require a thorough analysis because it involves strategic assets, according to an official in the ministry.

IFM made its unsolicited bid for the Naturgy stake on Jan. 26, sending the stock up 16% on the day. Two other major shareholders that own around 21% each, GIP and CVC-backed Rioja, said they wouldn’t sell but haven’t publicly opposed the deal. The offer caught both Naturgy’s management and its biggest shareholder, Criteria Caixa, by surprise, as they were informed at the last minute.

Criteria, which owns 25% of Naturgy, won’t issue a decision until the government makes its position clear, according to a person familiar with the fund’s thinking. Naturgy is one of Criteria’s largest investments and its chairman, 78-year-old Isidro Faine, served briefly as chairman of the utility, where he was replaced by a protege.

A Criteria spokesperson declined to comment.

Faine has also managed to build strong ties within the government with Sanchez and Calvino. Last year Faine helped broker the acquisition of state-owned lender Bankia SA by CaixaBank SA. CaixaBank and Criteria are sister entities controlled by the same foundation.

Board Influence

IFM’s approach will make the relationship between Naturgy’s management and shareholders more complicated. GIP and CVC have already been at odds with the company’s management and Criteria has been more inclined to align itself with management. Were IFM to join the company, it would also seek presence in the board, potentially deepening those tensions.

The government’s position on the bid would be the first major test for a decree issued last year to shield companies deemed strategic from foreign takeovers. Spain has traditionally been less prone to corporate nationalism than other major economies in Europe and it’s three largest utilities have significant foreign ownership. One of the country’s leading television broadcasters, Mediaset Espana SA, is a unit of Italy’s Mediaset SpA, and the leading newspaper publisher, Promotora de Informaciones SA, has a London-based hedge fund as its major shareholder.

In addition to blocking the takeover of Carrefour, the French government is considering injecting funds into the top division soccer league. Last year, the French and Dutch governments made significant capital injections into Air France-KLM, and the Italian government is in the process of a de facto nationalization of AirItalia. The German government took a 20% stake in airline Lufthansa last year, making it the airline’s largest shareholder, and has bought stakes in in vaccine maker Curevac and defense technology company Hensoldt.

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