Proposed Codere SA Takeover Hit By Founder Heft Demands For Compensation

In Spain, the founding family of local gaming company Codere SA is currently requesting that two American investors pay at least €900 million ($1.09 billion) for their significant stake in the Madrid-based company.

According to a report published on Thursday, Jose Antonio Martinez Sampedro founded the Madrid-listed company in the 1980s and is now responsible for land-based and online gaming operations in Spain, Mexico, Argentina, Italy, Uruguay, Colombia, and Panama. However, according to the source, the founder was fired as CEO of Codere SA in 2018 as part of a deal to restructure the company’s debts worth an estimated €1 billion ($1.21 billion).

Consequences of the Coronavirus

Following the coronavirus pandemic, Codere SA’s company was severely harmed, with most of its land-based venues forced to close or run at reduced capacity for most of last year. Even after issuing €500 million ($604 million) in new super-senior notes, the bank’s annual deficit for 2020 increased by over 253 percent year on year to approximately €237 million ($286 million).

Rescue path

Last month, American equity and bond investment managers Jupiter Fund Management and Invesco Asset Management stepped in to suggest an agreement in which they would buy out the operator’s remaining shareholders and provide the firm with an additional €225 million ($271 million) in cash to help raise its immediate liquidity.

Application with authority

However, according to reports, the Martinez Sampedro family has lodged an official appeal with Spain’s National Securities Market Commission, requesting that the proposed buyers be required to pay a minimum of €900 million for their 14.1 percent stake in Codere SA. The petition claims that the sum will be used as “justifiable compensation” after the group’s voting rights were revoked as a result of the 2018 restructure.

Players of note

Edward Arnold Mule, a fund manager at Silver Point Capital Management, is currently the largest single shareholder in Codere SA, with a 23.36 percent stake, followed by his company with a 21.79 percent stake. M&G, a London-listed investment firm, is reportedly a major player with a 20.97 percent stake, with Abrams Capital Management controlling another 8.79 percent of the operator’s issued stock.

Direct contempt

Martinez Sampedro is also claiming that Jupiter Fund Management and Invesco Asset Management broke Spanish financial laws by ‘purposefully avoiding’ an acquisition recommendation to minority shareholders after acquiring a 30 percent stake in Codere SA. The potential American buyers are said to have ignored all aspects of the appeal, claiming that their obligations are to the operator’s investors and that the acquisition is needed to save the company from near-certain bankruptcy.