El Corte Inglés holds key board meeting as chairman’s continuity hangs in the air

Turning point at El Corte Inglés. In tennis, many sets are won in tie-break scoring. The Spanish department store chain, the fourth biggest player in the field worldwide by revenues, is facing a key day. Today’s board meeting is critical to solve out the open battle between Marta and Cristina Álvarez, daughters of deceased longstanding chairman Isidoro Álvarez, and Dimas Gimeno, cousin and current chairman, to take over control of the group.

The board of directors, which meets on a regular basis the last week of each month, had agreed to meet today to approve the group’s results of fiscal year 2017. However, for several weeks rumours have it that this meeting would be critical to decide the continuity of Gimeno at El Corte Inglés, despite the fact that his potential exit hasn’t been included on the agenda. It had even been advanced to convene an extraordinary council in June to take up this issue again.

However, Gimeno, using his chairman faculties, has included two last-minute topics on the agenda that have given a twist to the game. On the one hand, he has added the filing of a business plan and the complaints of alleged corruption in the security department and the report that EY was asked to investigate.

Dimas Gimeno will present today before the board a business plan that, if approved, would secure him in his post

Until now, the Álvarez sisters have been the ones to put pressure on Gimeno’s activity. But the presentation of this plan, which includes, among other initiatives, an IPO in a couple of years, could open another scenario, especially since it could guarantee the strategic support of Qatari sheikh Al Thani, an action that will be key in the coming months to define the future of El Corte Inglés. Carlota Areces and Manuel Pizarro could also support the listing on the stock exchange.

The Arab investor granted three years ago a one-billion euros loan to El Corte Inglés convertible in 10% of the equity. This conversion will take place next July, which is accompanied by two options: increase the company’s share to 14% or keep its current share and obtain 300 million euros.

But if Al Thani chose this second option, El Corte Inglés should face payment, either by extending its debt or divestments. If the sheikh doesn’t increase its stake, the group would also be in a bad market position. For the time being, Al Thani hasn’t made public its positioning.

Al Thani, minority investor of the Spanish group, must decide in the coming months whether to increase his stake in El Corte Ingles or not

On the other hand, EY’s investigation could clarify an alleged case of internal corruption, which would involve the granting of contracts to companies related to the previous manager that headed the security department, Juan Carlos Fernández-Cernuda. He’s one of the trusted men of Florencio Lasaga, a historical group member, president of the Areces Foundation and advisor to the company, close to the Álvarez sisters.

Gimeno, who has already expressed his willingness to remain in office, intends to hold the match until the end despite pressure from his cousins. Marta and Cristina Álvarez have in their side the majority of board members: the current CEOs Víctor del Pozo and Jesús Nuño de la Rosa (who were promoted and empowered by the two businesswomen), Florencio Lasaga (Ramón Areces Foundation) and Carlos Martínez Echevarría.

Isidoro Álvarez daugthers, who own 69% of the Iasa family-office (which owns a 22.18% stake in El Corte Inglés) and are patrons of the Ramón Areces Foundation, have been tightening its grip on Gimeno in recent months. In fact, the current chairman in El Corte Inglés has no executive role since last October, when the group appointed Nuño de la Rosa and Del Pozo as CEOs.

With the appointment of Víctor del Pozo and Jesús Nuño de la Rosa as co-chief executive officer, Dimas Gimeno was left without any executive role

Since El Corte Inglés appointed the two CEOs, Gimeno has increased the number of public appearances, something untypical in the historical journey of the department store group, whose management team had always remained in a discreet position.

However, if the business plan conceived by Gimeno were to prosper today, the pressure of the Álvarez sisters would weaken at the same time that the chairman would be strengthened. The plan also includes the professionalization of its corporate governance and the entry of independent directors, which would help him to consolidate his position.