Outgoing government leaves state out of Novobanco sale
The Executive has requested an opinion from the State's legal centre to assess whether it is still in a position to decide on the sale of the Directorate-General for the Treasury and Finance's stake.
If Novobanco goes public next month, as the shareholder Lone Star intends, the State will be left out of the operation. This is because the government is in day-to-day management and doesn’t have the necessary conditions to make a decision regarding the 11.5% stake that the Directorate-General for the Treasury and Finance (DGTF) holds in the financial institution.
Government sources told ECO that Luís Montenegro’s Executive asked the State Legal Centre (CEJURE) for an opinion on whether it could decide on a possible sale of the state’s direct stake in the bank, in the order of 11.4% — in the event that Lone Star goes ahead with the operation in May, a month in which snap legislative elections are scheduled. The opinion concluded that it would not. ECO questioned the Ministry of Finance, but did not receive a reply.
Despite the turbulence that has plagued the stock markets in recent weeks, due to the escalation of the trade war, Novobanco maintains its plans to go ahead with an Initial Public Offering (IPO), but emphasised that the exact timing “depends on market conditions”.
These plans include carrying out the operation in May or, if the conditions are not met, waiting for the September ‘window’, according to CEO Mark Bourke.
The state still controls an indirect 13.54% stake in Novobanco through the Resolution Fund, but in this case it’s up to the entity led by Luís Máximo dos Santos to decide whether or not to sell.
In an interview with ECO published last Thursday, the Finance Minister refused to comment on whether the high volatility and uncertainty in the global financial markets could jeopardise the process of selling Novobanco. “What I know is that Lone Star intends to make an IPO, i.e. a public offer for sale, but that Lone Star doesn’t rule out making a direct sale either”, said Joaquim Miranda Sarmento.
“Naturally, we’re following the process, because, as I said, the state has, directly and indirectly, a total of 25% of the capital, but it’s up to Lone Star to make the decisions it sees fit about the partial or total sale or the continuity of Lone Star as a shareholder in Novobanco”, he added.
Under the side agreement signed in December, in the context of the early end of the contingent capital agreement, the state is not obliged to sell its position in an IPO process, but it has ensured that it will have the same conditions as the other two shareholders if it decides to take part in the operation, including the price.
In a direct sale process, the scenario changes: the state has guaranteed that it will sell at the same price as Lone Star (tag along mechanism), but the US shareholder will be able to force the state to sell its position (drag along mechanism), if it sells more than 75% of its position.
