Spanish News Baron Under Fire From Investors After Wipeout

  • Cebrian presided over 99% Prisa stock drop since 2000 IPO
  • Telefonica’s Alierta, Amber Capital seek to rally activists

Shareholders who have seen the value of Spanish publishing group Prisa all but wiped out since it went public in 2000 are now seeking to oust Chairman Juan Luis Cebrian, who rode out the downward spiral unchallenged.

Investors including Telefonica SA, CaixaBank SA and hedge fund Amber Capital UK LLP, the biggest shareholder of Madrid-based Promotora de Informaciones SA, are seeking to replace Cebrian and Chief Executive Officer Jose Luis Sainz Diaz by midyear, according to people familiar with the situation.

Luis Cebrian

Photographer: Peter Foley/Bloomberg

Prisa’s relatively modest market value notwithstanding, a shakeup at its helm would rock Spain’s political and business establishment. Cebrian, 72, is an institution: as founder and former editor-in-chief of El Pais, Spain’s newspaper of record, he’s weighed in on almost every important political decision since the country’s transition to democracy in the late 1970s.

His status as a political kingmaker, with friends including former Prime Minister Felipe Gonzalez, has helped insulate Cebrian from Prisa’s performance. While newspaper publishers across the globe have struggled to make the digital transition, Prisa stands out. Since its 2000 IPO the stock has lost 99.6 percent of its value, the worst performance of any listed European media group worth at least 100 million euros ($106 million). Still, major business players in Spain remain investors, including Telefonica, Spain’s former phone monopoly, CaixaBank and Banco Santander SA, the country’s largest lender.

Cebrian declined to comment, according to a Prisa spokeswoman. Spokespeople for Telefonica and CaixaBank declined to comment.

The stock rose as much as 3.4 percent, the most since Nov. 16 based on closing prices, and gained 1.6 percent to 4.80 euros at 4:16 p.m. in Madrid.

Under Cebrian, who was CEO of Prisa from 1988 to 2012, the company added debt to expand into areas like television with the purchase of pay-TV operator Sogecable, which was sold at a loss in 2014. A refinancing plan put in place when the Spanish economy hit a crisis at the start of the decade has stalled, forcing Prisa to consider selling the profitable Santillana textbook-publishing business that company founder Jesus de Polanco started in 1958.

“Cebrian has a terrible management legacy track record, as evidenced by the monumental share-value loss,” said Fernando Primo de Rivera, a portfolio manager at Armada Capital Plc, which owns about 300,000 Prisa shares. “The refinancing plan hasn’t been well executed, which occurs in parallel to the operational downturn in business units other than Santillana.”

Recently, shareholders including Amber Capital, owner of a 19.3 percent Prisa stake, have stepped up criticism of Cebrian. At a February board meeting, the hedge fund’s managing member, Joseph Oughourlian, voted against Cebrian’s pay package of 1.76 million euros, according to regulatory filings. Cebrian prevailed, but four directors abstained, marking the first time that his pay wasn’t unanimously approved since at least 2011, when the information started being disclosed.

Board Pay

Another irritant for investors such as Amber and Armada is the annual 5.75 million euros Prisa shells out to its 17-member board. The ratio of board-member compensation relative to market value is the second-highest among 53 Spanish companies tracked by Bloomberg. Cebrian himself has been paid about 18 million euros in cash and stock, including a retirement bonus of 3.6 million euros, since 2011.

The attempt to remove Cebrian is spearheaded by Cesar Alierta, the former Telefonica chairman who is president of its foundation, and still manages the relationship with Prisa, said the people. While Telefonica and CaixaBank don’t have board representation, they’re allied with Amber, according to the people. They and other like-minded shareholders, including Banco Santander, hold at least 40 percent of the shares. For now, the activists haven’t made any direct challenge to Cebrian.

Cebrian’s main support comes from the founding Polanco family, who own about 18 percent of Prisa, down from about 70 percent in 2009. He is credited for creating El Pais, a cornerstone of Spanish media, in the immediate aftermath of Francisco Franco’s 36-year dictatorship.

The Polancos declined to comment, according to a Prisa spokeswoman. Amber’s Oughourlian declined to comment, as did a press officer who works with Alierta.

Santillana Sale

The tension has risen lately over what to do about Prisa’s 1.49 billion-euros in net debt, including large bank loans due in 2018 and 2019. Prisa said in November it would consider a full or partial sale of Santillana, which accounts for the bulk of the company’s revenue and profit. While Prisa is asking for as much as 2 billion euros, bidders have balked, according to people with knowledge of the developments. Cebrian and the Polancos have resisted shareholder pressure to accept a lower price, the people said.

Prisa said Wednesday that the sale is progressing. While the Polancos have stayed loyal to Cebrian, their power has been diluted by several capital increases over the years. Telefonica and CaixaBank gained their shares together with Santander and HSBC Holdings PLC in 2014, after convertible bonds they owned were swapped for equity.

While avoiding a direct challenge to Cebrian for now, the activists are looking at options while they gather support, with a goal of installing new leadership by the company’s annual shareholder meeting, the people said. The date for that meeting, which typically occurs in April, hasn’t been set. Alierta and Oughourlian would rather work out an orderly transition than battle Cebrian in public, the people said.

“The main problem Prisa has is its high debt and the proximity of important maturities, together with the scarce cash flow,” said Andres Bolumburu, an analyst at Banco Sabadell who rates Prisa a sell. “If they sell Santillana for 2 billion, they could pay-off almost all the debt, but we believe it is very hard to reach those valuation levels for the asset.”

— With assistance by Manuel Baigorri, and Macarena Munoz Montijano

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