The Spanish economy has been in shock since BBVA launched a hostile takeover bid against Banc Sabadell last Thursday. After the Catalan entity rejected several friendly purchase offers, now the board chaired by Carlos Torres is preparing to try it by means of fait accompli.
Needless to say, the maneuver is aggressive, reminiscent of the myth that the stock market is a game only suitable for sharks. It is not about attributing anything immoral to a hostile takeover bid, as it is a perfectly legal procedure regulated by the CNMV, and it does not always result in the disappearance of the victim. However, the comparison is useful, since the truth is that those who invented this tool were a series of characters who were a product of the crazy years of Wall Street, similar in some ways to that abject Gordon Gekko that Michael Douglas played in the movie Wall Street ( 1987).
Many will remember the story. The protagonist is Bud Fox (Charlie Sheen), a young and intelligent broker who arrives in the financial district of Lower Manhattan full of hope and noble ideals, but who will soon discover that compassion is very low there. He falls into the hands of Gekko, who takes advantage of his good work and privileged information to buy an airline, not with the intention of making it prosper, but to tear it apart and sell it in exchange for enormous profits, even at the cost of putting the employees on their toes. the street.
Surely they were not as bad as Gekko, but Victor Posner (1918-2002), Carl Icahn (1936-) and Louis Wolfson (1912-2007) well deserve the label “wolves of Wall Street.” The latter is the father of the first hostile takeover in history.
Wolfson’s biography is very American. Born in Missouri (USA), he was the son of a scrap metal dealer and, as a young man, a better athlete than a student. He was a professional boxer and then an American football player, and thus obtained a place at the University of Georgia, although he never graduated. He didn’t need it, since an initial 10,000 dollars, which he invested in the construction industry, was enough for him to become a millionaire at the age of 28.
This allowed him to buy Streetcars in Washington, D.C., a transportation company that he sold for 13.5 million, and then Merritt-Chapman
Thus we come to 1955, when the man achieved national fame by getting into a war with Montgomery Ward, which at the time was the second largest catalog retailer in the United States. It was the first time that a financier tried to take control of a business behind the back of the board of directors. It didn’t turn out well, but he set a precedent.
Then there is Victor Posner, who, after making a fortune in real estate, in 1966 acquired the majority of the shares of Wendy’s, the famous fast food restaurant chain, and he did so mainly to use it as an investment tool. Throughout his life he would accumulate presidencies in many other boards of directors, his most famous operation being the hostile takeover that he launched on the Sharon Steel Corporation in 1969.
Posner was a pioneer of “leveraged buyouts,” the acquisition of companies using debt instruments. He was also ahead of his time in what the Anglo-Saxons call asset stripping. The term, in its worst sense, refers to the practice of selling a company’s assets to increase investor returns. Both are risky operations. In fact, the Sharon Steel Corporation ended up bankrupt.
And the genius when it comes to asset stripping is the third on our list, Carl Icahn. The president of TWA said of him that he was “the most greedy man on the face of the Earth,” and he had reasons to hate him, because in 1985 he launched the mother of hostile takeovers for this airline company. After the deal, TWA was gleefully torn apart to pay off the debt the Queens businessman had incurred in order to finance the purchase. It was just one of the many adventures of “Icahn the barbarian”, as they called him, an “Attila of Wall Street” who did not let the grass grow wherever he passed.
Towards the end of the 1980s, the collapse of the Drexel Burnham Lambert bank and excess leverage combined to reduce the attractiveness of this type of operation. In addition, companies perfected some defense mechanisms; for example, forcing the stock market value to drop to deter potential buyers. Among other ways, this can be done by selling the company’s most expensive fixed asset (making yourself a “crown jewel,” in stock market jargon), or by launching a “poison pill,” that is, suddenly going into debt. Another resource is to let yourself be bought by a “white knight”, a friendly company.
And what about Spain? Here the history of hostile takeovers is shorter and less glamorous. The majority of large purchases that have been made in the Spanish stock market have been agreed upon, and, when this has not been the case, they have generally failed. This is how Hesperia’s attempt against NH, in 2003, or Gas Natural’s attempt against Iberdrola and Endesa, in 2003 and 2005, ended.
Curiously, the first hostile takeover in the history of Spain was that of Banco de Bilbao against Banesto, in 1987. It didn’t go well for them then, but we will see what happens this time. The Banc Sabadell board has about eight months to do like Ulysses and persuade its shareholders against the siren song.
