The founders of Codere, the Martínez Sampedro family, have requested to introduce a new item on the agenda of the shareholders’ meeting held on May 11 to force creditor investment funds to present a public offer for the the entire company at 9.58 euros per title, which represents a total amount of around 900 million euros, as requested this Monday to the National Securities Market Commission (CNMV).
According to the founders of Codere, the fair price per share claimed is the guideline that has been set based on the end of January 12, 2018, the date on which the funds took control of the company. They have also asked the CNMV to freeze the complaint files that were filed, “without knowing the existence and consequences of the civil conspiracy”, until the file of the forced bid is resolved.
The founders of Codere have been claiming for more than two years that the US funds that control the company file a takeover bid. The new lawsuit is based on article 40 of the Internal Regulations of the CNMV and the Administrative Procedure Law, as well as the rules of the European Securities and Markets Authority (ESMA), which prohibits explicitly the maneuvers of shareholders and directors that imply a collusion of interests unrelated to those of the other shareholders.
The founders of the company have been in a tough legal battle with the funds since they took over the management of the gaming operator in 2018 with the support of several independent directors. The Martínez Sampedro family transferred shareholding control to these funds in 2017, led by the American Silverpoint (with 21% of the shareholding), but not the management.
The new petition from the Martínez Sampedro family comes after the CNMV filed the so-called Codere case, concluding in their investigation that there had been no agreement between the funds and the council to take control of the company as the family denounces.
According to the new lawsuit, “for the first time”, when initiating this file under said article 40, the regulator “has the opportunity to analyze the takeover of a Spanish listed company, carried out in a concerted manner by a civil conspiracy from the United States. United, to, without new purchase of shares, take control of a listed company without presenting a forced takeover bid, as required by Spanish law, events that affect Codere today, but could affect any other Spanish listed company in the future and in relation to which, to date, there is no doctrine of the CNMV ”.
The new lawsuit also provides the opinion of a US law firm, which has analyzed the results obtained by investigating thousands of evidence of the alleged relationship of collusion between the investment funds and Codere directors to take their control, according to the founding family . The lawyers conclude in a report, among other issues, that “under their legal criteria and with the standards of US law, there has been some type of civil conspiracy to organize from the US the takeover of Codere without presenting a forced opa” says the communication to the CNMV.
In addition, they highlight that “in secret, they devised and planned a scheme, presented as a transition plan that would result in fundamental changes in the structure and business of Codere”, which included the termination of José Antonio Martínez Sampedro, as president of the company , and Luis Javier Martínez Sampedro, as vice president, and the appointment of Vicente Di Loreto, as CEO of Codere.
According to the plaintiffs, Di Loreto was hired as head of G3M Consulting to provide strategic, financial and business consulting services to Codere, and was appointed head of the company’s monitoring committee when José Antonio Martínez Sampedro was president. Subsequently, and in accordance with the plan he had agreed with Silverpoint, he was appointed by the company’s CEO council.
The lawsuit states that, “as is fully verified in the emails exchanged, which were analyzed in the procedure called discovery carried out between 2018 and the beginning of 2020 in the US, the current directors of Codere addressed the takeover of the company within the appointments committee and the board of directors itself ”. This circumstance means avoiding the obligation of remuneration under equal conditions to all “reasonable” shareholders of Codere, which were on January 12, 2018, when the takeover was materialized, “by avoiding launching a takeover bid for the entire of the company’s shares ”, the plaintiffs claim. Spanish legislation contemplates the takeover of a certain company, but this procedure must have the approval of the shareholders by calling a meeting called for approval as the only item on the agenda.
A long conflict
In 2014, a group of investment funds bought Codere’s bank debt and bonds and negotiated with the Martínez Sampedros to refinance their debt, forcing a financial restructuring and imposing the exchange of most of that debt for shares, through a capital increase. Later, they took control of the management and unleashed the legal conflict with the founders.
The gambling operator is going through a difficult financial situation. At the end of last April it reached an agreement with a significant group of its creditors, holders of a majority of the bonds currently issued, for which they must inject up to 225 million euros into the group that would ensure the viability of the company.
However, the company has repeatedly deferred the payment of interest corresponding to various issues, which has led the credit rating agency S&P Global to downgrade Codere’s rating from ‘CC’ to selective default (‘SD’), and he warned of a “permanent liquidity crisis”.