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Inflation slowed down in April in Spain due to lower energy prices and stood at 8.4 percent, 1.4 points lower than in March

Prices, however, continue to grow at historically high levels and the return to moderate rates, according to the main international agencies, will take months. Consequently, the fall in electricity prices was key to start deflating inflation.

The Spanish Government will mobilize 16 bn euros for Companies to alleviate the economic consequences of the Russian invasion in Ukraine

The Spanish Congress has passed a Royal Decree (a regulatory instrument) that allows the Government to spend 16 bn euros amongst companies to “fairly distribute the effects of the war and to preserve as much as possible the path of growth and job creation”. The royal decree has already been in force since April 1st and includes direct aid, such as the 20 cents per liter of fuel discount for all citizens, for a total amount of 6 bn euros, in addition to another 10 bn euros in ICO (Official Credit Institute) guarantees for bank loans, as well as other social measures.

Spain and Portugal will be able to limit the price of gas to 50 euros per megawatt/hour in order to reduce the cost of energy

Both countries have reached an agreement with the European Commission, which a month ago recognized the “Iberian exception” due to the scarce electrical interconnection of the peninsula with the rest of the European countries. This agreement will be in force over the next 12 months.

Spin off: splitting a company is getting increasingly popular in Spain

The world’s stock exchanges are experiencing an increase in corporate spin-offs. Spain is no stranger to this trend with the trading of Acciona Energía or Línea Directa Aseguradora, which were spun off from their parent companies, the construction company Acciona and Bankinter in 2021. More recently, investors’ eyes are set on potential spin off operations by energy companies such as Naturgy, Repsol or Cepsa.

ASCRI foresees a temporary halt in private equity investment in Spain due to the war in Ukraine

ASCRI, Spain’s industry employers’ association, has predicted that investing Firms will take a break during the second quarter of the year as a reaction to prevent from potential consequences on businesses and the economy due to the Ukraine invasion.

Yet the private equity in Spain is in a “good position”. Investment during the first quarter of the year reached 2.1 billion, marking the second-best record and verging on the record set in 2019 of 2.2 billion. This amount was invested in 178 deals, 145 in venture capital and 33 in private equity. In 2021, investment in the sector recorded its second-best figure ever, reaching 7.5 billion. It only falls short of the 8.5 billion it recorded in 2019.

What are the main mechanisms that help Spanish companies protect themselves against hostile takeover bids?

In Spain, takeover bids are usually done in a friendly way. The vast majority of them are preceded by an agreement between the offeror and the controlling shareholders or the top management of the target company. However, there are some that are not conducted this way, and are considered hostile takeover bids. In this context, Spanish companies have mechanisms to protect themselves from hostile moves.

Following the plummeting of stock prices in March 2020, the Government created an FDI regulation to protect strategic Spanish companies from foreign investors aiming at acquiring more than 10% of the capital of the target company. Under this regulation, the Government has the authority to veto or give green light to deals involving Spanish companies considered as strategic. Therefore, there is an obvious need for foreign investors or companies doing m&a in Spain to understand the Spanish market and know well how to work with the different stakeholders involved in the deal.

With regards to what companies can do themselves, first it is worth noting that once a takeover bid is announced in Spain, the target company’s board activity is limited by the so-called “duty of passivity”. According to the takeover regulations in Spain, the board of a company may not promote the issuance of shares, sell assets, distribute extraordinary dividends or, in short, torpedo the offer. However, the target company can issue shares, sell assets or increase the company’s perimeter if authorized by the shareholders’ meeting. The board can also make decisions that, although limited to day-to-day operations, can end up complicating the takeover bid, such as signing contracts with suppliers or with executives that provide for special indemnities in the event of a change of control.

An alternative is for the target company to activate loyalty shares, a new mechanism under the Spanish law that allows for the doubling of the weight of shareholders with more than two years’ presence in a company, which would dilute the power of the hostile shareholder.

ESG: The increase in bankers’ salaries raises investors’ criticisms

Three of the five Ibex 35 banks have experienced shareholders’ rejection to the directors’ remuneration in 2021. Retail shareholders of Sabadell, Santander and BBVA have been the most critical. Yet, the remuneration of directors and board composition have also been under the focus of criticism from investment firms at shareholders’ meetings, despite the strong results of the financial entities.

In this sense, major proxy advisors have incorporated new policies on director and executive pay into their recommendations for the current earnings season. ISS calls for benchmarking salaries against those earned by the company’s rank-and-file employees, how ESG issues impact compensation, and aligning executive pay with financial and non-financial performance, according to Morrow Sodali.

ESG: New Waste and Contaminated Soil Law which aims to promote the circular economy in Spain

Spain launched in April a new law that establishes the principles of a circular and low-carbon economy through a thorough revision of the basic state legislation on the waste and contaminated land. It also creates two new taxes on non-reusable plastic containers, and waste deposited in landfills.

The new waste and contaminated land regime came into force on April 10, 2022. The new taxes on plastics and waste will enter into force on January 1, 2023.

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