MADRID â€" A takeover battle for Deoleo, Spain’s biggest olive oil company, is testing the Spanish government’s willingness to allow foreign investors to control over one of its main agricultural sectors.
At least three foreign bidders submitted offers last week for Deoleo, including an Italian state-backed fund, Fondo Strategico Italiano, and two private equity firms, the Carlyle Group and the Rhône Group, according to a person familiar with the bidding process who was not authorized to comment.
The government of Prime Minister Mariano Rajoy has already warned any buyer against splitting up Deoleo’s assets or reducing its focus on Spanish olive oil farming.
Miguel Arias Cañete, the Spanish agriculture minister, told reporters last week during a visit to Córdoba, in the olive heartland of southern Spain, that “the government is following this process very closely and is sending the message that we don’t want the company to be cut up into bits.†He added: “We want Deoleo to bet on Spanish oil.â€
Spain is the world’s largest producer of olive oil. Deoleo distributes about a fifth of the olive oil sold worldwide, through brands that include Carbonell and Koipe in Spain, as well as Bertolli and Carapelli in Italy.
The takeover battle was started by four Spanish banks that together own 31 percent of Deoleo’s equity. The banks are looking to divest themselves of a nonstrategic asset to strengthen their balance sheets, in line with the conditions agreed to with international creditors in return for Spain’s banking bailout.
However, under Spanish stock market regulations, any buyer of a stake of more than 30 percent in a listed company must then make a takeover bid for the entire company. JPMorgan Chase, the investment bank, is advising Deoleo.
The largest of Deoleo’s banking shareholders is Bankia, which owns 18 percent of its equity. Almost two years ago, Bankia plunged Spain into a financial crisis because of its losses on mortgage loans, which forced the government to nationalize Bankia and then negotiate a European bailout of the sector worth as much as 100 billion euros, or $135 billion at current exchange rates. In the end, Spain used ¤41 billion of that bailout money, half of it to salvage Bankia.
Deoleo reported a profit of €20 million last year on revenue of €813 million, but it also has net debt of €472 million.
In a statement Thursday to the Spanish market regulator, Deoleo confirmed that it had received different offers without naming the bidders. It said all the bids valued the company below its market capitalization, which amounted to €456 million on Monday night.
A spokesman for Deoleo said the company could not comment further on the bids or on the government’s apparent concerns about its future ownership. About 45 percent of Deoleo’s equity is in free float, with the rest held by the banks and some other corporate investors.
To keep Deoleo in Spanish hands, the government could put together a counteroffer, led by its state-owned industrial holding company â€" Sociedad Estatal de Participaciones Industriales, or Sepi â€" with the backing of some other Spanish industrial groups and current minority shareholders in Deoleo.
Such a counterbid, however, would run against recent efforts by the government to revive foreign investment in Spain, which plummeted after Bankia’s near-collapse. Spain continues to struggle with record unemployment, but its economy came out of recession in the third quarter of last year.
The European Union produces three-quarters of the world’s olive oil, mostly around the Mediterranean. For the most recent harvest year, Spain was in line to produce 1.5 million out of the European Union’s 2.3 million tons of olive oil, according to estimates from the European Commission. Italy ranks second, with an estimated 450,000 tons, followed by Greece and Portugal.
However, a longstanding Spanish frustration is that Italy has more successfully focused on exporting the highest quality olive oil, known as extra virgin, even though Italy itself is the largest importer of Spanish oil, which it buys mostly in bulk.
