As investors are no doubt aware, 1997 is shaping up to be year of major privatizations among state-owned Spanish companies. This process has already begun with the recent public offering of the remaining state-held shares of Telefónica of España.
The Spanish government plans additional privatizations of such well-known companies as Endesa or Argentaria. These are likely to follow the same procedures established in the Telefónica privatization. For this reason, the public offering for Telefónica may be a good indicator of what may be expected in future privatizations.
Although the Spanish government will cease to be a direct shareholder of Telefónica of España, for a period of 10 years it will retain indirect control over the company by submitting certain company operations and acquisitions of controlling stakes to a regime of prior administrative authorization.
To this end, Royal Decree 8/1997 of January 10, approved in development of Law 5/1995 of March 23, has established that prior administrative authorization is required not only for operations of merger, demerger, voluntary dissolution, amendment of company aims and alienation of certain assets, but also for certain acquisitions of Telefónica shares, in which the acquiror obtains at least 10% of its capital stock.
Failure to comply with the requirement for prior administrative authorization will result in all acts or resolutions so adopted being void ab initio.
It appears probable that future privatizations will follow the same path established in the Telefónica operation, and it is therefore by no means unlikely that the remaining companies to be privatized will in future remain subject to a similar requirement of prior administrative authorization, adapted to the circumstances of each sector. Companies privatized in this way will thus remain to an extent under the supervision of the government.