By Elena Moya
LONDON, July 5 (Reuters) - Spain’s El Corte Ingles will continue to resist any pressure for a flotation, with a court battle with shareholders likely to drag on for years, people familiar with the company’s plans said.
The retailer, one of Europe’s largest department store chains, is eyeing expansion in Italy and France as well as planning new stores in Spain, the sources said.
This will be financed with its own funds, they added.
“At present, no other shareholders want to sell. There are no IPO plans,” one of the sources said. “The court battle will take years to solve.”
El Corte Ingles intends to appeal an April court decision that allows a group of shareholders to sell their stock at prices based on typical valuation formulas for other listed retailers instead of the book value the company wanted to pay.
The ruling means the chain must pay a dissident investor group headed by Cesar Areces Fuentes, which controls less than 3 percent of the stock, 98.5 million euros ($133.8 million) instead of the 35 million the firm said the stake was worth.
Since the ruling, investors and analysts have speculated that other investors would want to push for a flotation to exit the company at the higher price.
Almost half of the company’s shares are owned by Fundacion Areces, which inherited most of the fortune of founder Ramon Areces.
The foundation is led by Isidoro Alvarez, the 74-year-old chairman of El Corte Ingles who through the foundation and his own stake legally represents about 57 percent of the stock, the sources said.
Two other families have another significant stake of between 10 and 20 percent, while more than 3,000 directors own the rest. EXPANSION
The company posted net profit of 653 million euros last year on sales of 15.9 billion euros, according to its Web site.
El Corte Ingles has 67 stores with an average of 30,000 square metres of shopping space in each. They sell everything from pianos to tweezers to vintage wine and counted footballer David Beckham as one of many famous customers.
A flotation of El Corte Ingles, valued at about 13 billion euros by the McKinsey consultancy, is the most awaited stock market listing in Spain.
“They are a cash cow,” said Jose Ruiz, a retail analyst at Kepler-Landsbanki in Madrid. “They don’t need the cash to expand. All their growth is organic, and it doesn’t look as if there are changes in ownership that would lead to an IPO.”
“For the time being, we’ll have to wait,” Ruiz said. “The flotation plans don’t look good.”
A spokesman for El Corte Ingles declined to comment.
Known for its guarded privacy, El Corte Ingles doesn’t even normally run job ads in newspapers to find new hires for its 72,000 workforce, preferring word of mouth instead.
Founded in 1934 in central Madrid by Areces, a young tailor that called his company “The English Cut” to emulate the upmarket professionals on Savile Row, the company plans to continue expanding throughout Spain.
Its logo of green and black triangles is not present in about 10 of Spain’s 50 provincial capitals, the sources said.
The retailer has faced obstacles from local authorities trying to protect small and local shop owners. The store in Tarragona took about 10 years to obtain the necessary permit, the sources said.
The company, which already has stores in Portugal, plans to expand into Italy where authorities are more open about using El Corte Ingles as an anchor in city centres to attract satellite retailers around the department store and revitalise inner cities, the sources said.
The company, which has no plans to expand in northern Europe or the Americas, may also extend a commercial alliance with France’s Galeries Lafayette, under which products from both brands can be found in each others’ shops, the sources said.
El Corte Ingles also plans to expand Sfera, a fashion chain with shops throughout Europe, they said.
((Reporting by Elena Moya; editing by Jane Baird/Alexander Smith; email@example.com; RM firstname.lastname@example.org; tel +44 207 542 2515))
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