There are 125 investors with qualifying holdings in the 38 companies listed on Euronext Lisbon, that is, with at least 2% of the voting rights in these companies. Joining the thousands of small investors spread across the four corners of the globe who invest their savings in the Portuguese stock exchange, it would be enough for the market to function in a transparent and efficient manner. However, the picture is different. Only 18% of these large investors control two-thirds of companies with dispersed capital on the stock exchange.
The group of powerful people in the national financial market is made up of 22 individuals who, directly or indirectly, control more than 50% of the capital of 24 companies listed on Euronext Lisbon. An example of this is Sonaecom, which has 88% of its capital in the hands of the Azevedo family, through the companies of the Sonae group, Corticeira Amorim, which is 71% owned by the Amorim family, via three holding companies, and by Semapa, which has 82% of its capital under Sodim, a holding of the Queiroz Pereira family.
With rare exceptions (such as CTT and EDP), a shareholder structure of most companies is concentrated in very few investors with dominant positions. Navigator (formerly Portucel), which currently has a market capitalization of 2.3 billion euros, making it the fifth largest company on the Portuguese stock exchange, has only one qualified investor (Semapa), which holds 69% of the capital. of the paper bin.
The control of companies listed on Euronext Lisbon by a few is not a new reality in the Portuguese market. It has been like this for a long time. In 2007, for example, at a time when Ricardo Salgado was the almighty of the economy, having under his control over 5.3 billion euros in stakes in seven companies (BES, Espírito Santo Financial Group, Portugal Telecom , EDP, PT Multimédia, Novabase and Semapa), less than a fifth of the large investors in the national market effectively commanded half of the companies on the stock exchange. Nothing has changed in this matter in the last 14 years. However, with the primary of the continued concentration of shareholder power in companies, practically everything else has changed on the Portuguese stock exchange. Starting with the nationality of the main protagonists.
Chinese power in Portugal
Over the last decade, Chinese investment in Portugal has gained enormous expression. The turning point occurred in particular in 2011 with the implementation of the Troika’s Economic and Financial Assistance Program, which included a strong privatization policy. For the Chinese, this imposition by the European authorities (European Central Bank and European Commission) and the International Monetary Fund acts as a gateway to the national market and an open window to Europe.
China Three Gorges (CTG) was the first and, so far, the biggest boom in Beijing for Portuguese lands: the company owned by the People’s Republic of China has been, for ten years, the biggest foreign investor in the Portuguese market thanks to a million-dollar investment made in 2011 in EdP – Energias de Portugal.
The relationship between CTG and the national electricity company dates back to December 2011, when it won a race in the last EdP privatization process. At the time, the Brazilians from Eletrobras and Cemig, and the German E.On, were well-known behind. The check issued to the Portuguese State amounted to 2.69 billion euros, incorporating a 53.6% premium over the market price of EDP shares on 21 December. choice of CTG by the Government). In exchange, a CTG now controls 21.35% of the share capital of the electricity company, then led by António Mexia, with the possibility of buying the remaining 4% of the capital then held by the State.
Since then, a lot of water has flown. The highest point in the relationship between the two companies dates back to May 11, 2018, with the launch of a double takeover bid by CTG for EDP and for shares in EDP Renováveis. The two offers totaled more than ten billion euros if all shares not held by the Chinese were acquired. At the time, CTG owned 25.15% of EDP’s capital.
Despite the delay in taking a position in relation to the OPA by the Portuguese Securities Market Commission (CMVM), an operation ended up not reaching a successful conclusion, with the electricity company’s shareholders vetoing it, on April 24, 2019, in General meeting, the change in the company’s statutes that would allow EDP’s largest shareholders to vote with more than 25% of the votes – a crucial condition for the operation to be carried out. With the end of the takeover bid, CTG did not cut its connection with EDP, but has been reducing its stake in electricity, despite remaining the main investor.
CTG has a 19.03% stake in EDP, which is valued at market prices at 3.6 billion euros. But your domain on Euronext Lisbon doesn’t stop there. It grows up to 6.7 billion euros thanks to a 75% controlling stake in EDP Renováveis (currently the most valuable company on the stock exchange) and 2.09% ownership of BCP’s capital. of electrical power.
If in the strategic field things may not have gone well for the Chinese at CTG, in the financial sphere they cannot complain. In the ten years in which the Chinese have been part of EDP’s shareholder structure, shares in the electricity company have appreciated 40% and generated 1.65 billion euros in dividends and 827 million euros in sales for the coffers of the Chinese state-controlled company of actions. It means that, counting only on dividends and with the interim sale of shares, CTG has already recovered 92% of the initial investment made.
The interest of Chinese capital in the national stock exchange, in particular in EDP, is an old relationship. In addition to CTG, the electricity company even had Chinese CNIC in its shareholder structure, through its subsidiary Orise. They started to build a qualified position in 2017, which reached 4.98% of the capital in 2019. But CNIC’s position was diluted, as a result of CTG’s failure to launch the OPA on EDP. Currently, CNIC is no longer one of EDP’s key shareholders.
In the electricity sector, the strong presence of Chinese capital in Redes Energéticas Nacionais (REN) should also be highlighted, through a 25% stake in State Grid of China and 5.3% in Fosun. Both positions were built following the company’s privatization process. The first, in 2012, when the State sold 40% of REN’s capital, with 25% being handed over to State Grid of China for 387 million euros (to date, it has already recovered 65% of this investment, only with the dividends that have since 2012). Two years later, in 2014, as a result of the last phase of privatization of the company, the State disposed of 11% of the capital it still held in REN, handing over 3.9% of that position to the insurance company Fidelidade, which is held by Fosun. Currently, Fosun controls 5.3% of REN’s capital and China’s State Grid holds a 25% stake.
The quintet of Chinese investors on the Portuguese stock exchange was completed with Finansol, a Chinese intermediary controlled company Stanley Ho that holds a 57.8% stake in Estoril-Sol, and also with China Communications Construction, the fourth largest construction company in the world, which in May it purchased 23% of Mota-Engil from MGP – Mota Gestão e Participações, holding that it aggregates the positions of the Mota family in Mota-Engil, for 169.4 million euros. Today, the position of CCCC amounts to 32.4% of the capital of the construction company of António Mota.
the Portuguese still rule
The Portuguese stock exchange has investors with qualified positions from 16 nationalities. These are also joined by investment funds and small investors.
The Chinese are the main foreign investors, followed by the North Americans and Angolans. But it is Portuguese investors who continue to dominate, with emphasis on the Soares dos Santos, Amorim and Queiroz Pereira families who, together, have under their control over 11 million euros, the equivalent of 15.5% of the market capitalization of the main share index of Euronext Lisbon (PSI 20). The Soares dos Santos family is, in fact, the largest investor in the Portuguese market, thanks to a 56% equity position in Jerónimo Martins.
The latest reports and accounts of the 38 companies listed on Euronext Lisbon show that the weight of national capital is twice that of foreign capital. But that does not mean that foreign investors are attracted to withdraw. On the contrary. The North American asset manager BlackRock has been quite active, holding direct and indirect stakes in six companies, as they give it a business domain of almost three billion euros in the Portuguese market. Of equal interest is Norway’s sovereign wealth fund, Bank Norges. At the end of last year alone, it held equity investments in 17 Euronext Lisbon companies, with a global value of one billion euros. This year, its investments in Portuguese land amount to 1.2 billion euros.
Shareholders, big or small, have one thing in common: they want to make money, whether in the present or in the future. The national stock exchange, especially with the largest companies, has the attraction of paying good dividends and this has attracted many institutional investors. But it has also served as a stage for closer diplomatic and geostrategic relations. Examples of this are the holdings of Chinese companies in EDP and REN, the Angolan investments in Galp and NOS, Qatar in EDP and the State of Oman in REN.