The National Securities Market Commission (CNMV) will closely follow the future of the emergence of STC in Telefónica, although sources from the regulator have indicated that “to date” there are no “actions or circumstances that indicate that the applicable regulations are not implemented.” has complied with in the recent notification of positions”, according to ‘Europa Press’. Specifically, the 9.9% that the Saudi group has acquired from Telefónica is divided into 4.9% in shares and 5% in financial instruments, although this operation went unnoticed in the CNMV records until recently. September 5, when the entry of the Saudi group into the Spanish operator was announced.
In this sense, sources from the supervisor have recorded that the aforementioned financial instruments have different execution periods and that as STC exercises them, it will have to notify the CNMV of the changes that occur in its participation. “In addition, any derivative is subject to Government authorization if it is produced. That is, it is not over yet,” they stressed. They thus refer to the regulations in force in Spain regarding foreign investments in strategic listed companies and by which the Executive has to give permission to non-EU investors who intend to acquire more than 10% of a company of this type.
However, this threshold is lowered to 5% in the case of companies with interests in the field of national defense, such as Telefónica. Regarding STC’s strategy to acquire Telefónica’s shares, an operation in which the Saudi company had the support of Morgan Stanley, the supervisor’s sources have clarified the operation of European regulations, which, according to their investigations and With the information available so far, it has not been breached.
“Neither the letter nor the interpretation of the regulations allow an investor who builds a shareholding to fragment or cut it into packages lower than the 3% threshold to avoid or delay its publication. Whether it is done directly or through an intermediary, vehicles investment banks, banks or custodians. Whether shares are made through or through derivatives that give the right to acquire them and then exercise voting rights. This would be contrary to the applicable legal regime,” they stressed. In this way, the CNMV concludes that to date there has been no action or circumstance that indicates that the applicable regulations have been violated in the emergence of STC in Telefónica.
Morgan Stanley notified the CNMV on the night of September 11 of a 12.178% stake in Telefónica, which includes the 9.9% that the financial entity acquired for STC and of which it assumes the risk through a hedging derivative called ‘put’. /purchase option’ (buy/sell option). The hedging derivative that Morgan Stanley has made available to STC – and which by regulation must be communicated to the CNMV – would allow the Saudi group to order the US investment bank to recover possession of that 5% in financial instruments to sell it on the market. or carry out other operations in the event that the Ministry of Defense decides not to approve the operation.
However, the hedging derivative affects the 9.9% that STC has acquired for 2.1 billion euros, so if Defense does not approve the operation, the Arab group could also decide to get rid of the other 4.9%. Although another option would be to keep it, given that to hold that percentage it does not need approval from the Government, as it is below the 5% threshold established in the regulations.