Hedge Fund Fighting Over Spain’s Top Paper Gets Close to Sanchez

A power struggle for Spain’s best-selling newspaper is coming to a head and Prime Minister Pedro Sanchez will be watching closely.

Founded at the birth of Spanish democracy in the 1970s, El Pais has traditionally supported Sanchez’s Socialists but has had a tense relationship with the new brand of left-wing politics pursued by the current premier.

Sanchez has said publicly that the paper’s publisher,Prisa, wasinvolved in the maneuvers that saw him ousted as party leader in 2016. El Pais’s editorial page has attacked him repeatedly since his return to power for ignoring the advice of party elders who say his deals with Catalan separatists and the far-left group Podemos gift legitimacy to dangerous rivals.

Now, it seems, Sanchez could catch a break. Prisa’s biggest shareholder wants to break up an old boys’ network club that is critical of the premier and still seen as pulling strings at El Pais.

Joseph Oughourlian, founder of London-based hedge fundAmber Capital, is ready to vote to have Prisa Chairman Javier Monzon removed at a shareholders’ meeting on Monday, according to people familiar with his thinking speaking on condition of anonymity.

Sanchez’s closest advisers have been keeping tabs on the situation as the ballot approaches. Oughourlian has met with Sanchez since the prime minister took office — both are 48, born the same month — and he’s developed a close relationship with at least two people in the premier’s inner circle, according to a person who knows them both.

A more sympathetic stance from the paper of national record could help a premier wrestling with the country’s worst recession in at least 70 years as he tries to maintain his balance atop a shaky coalition.

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Spain is not alone in having a paper of choice take political sides, and having an outsize influence in shaping the public’s thinking on issues that can sway elections.Fox News, owned by billionaire Rupert Murdoch, is closely aligned with Donald Trump. In the U.K., Brexit was shaped by euroskeptic publications such as The Sun tabloid and the conservativeThe Telegraph.

The same kind of ideological divisions are present in all the major publications in Germany, Italy and France. In Spain, however, it’s reached a boiling point.

Oughourlian, who controls 29.8% of Prisa, has come to consider that Monzon is too close toBanco Santander SA and that he usesEl Pais to pursue the bank’s political interests, the people said. While Monzon is an independent board member who was endorsed by Oughourlian and the rest of the board when he became non-executive chairman in January 2019, he was nominated by Santander and combines his role at Prisa with other non-executive posts as chairman of Santander’s online unitOpenbank and a board seat at the bank’s Spanish unit.

Santander’s financial influence at the publisher also goes way beyond its 4.1% stake. It’s one of the highly leveraged company’s main creditors and helped two other key shareholders with a combined 12.6% to finance their investments.

Oughourlian and Sanchez’s director of communication Miguel Angel Oliver declined to comment when contacted by Bloomberg, as did spokespeople for Prisa, Santander and Monzon.

The Old Guard

At the heart of the dispute is a fight between the Spanish establishment and a new generation of leaders dealing with the legacy of the boom and bust years: a younger generation that missed out economically, a resurgence of the nativist far-right and question marks over the future of Catalonia.

Old-school executives like Emilio Botin at Santander and Juan Luis Cebrian at Prisa amassed fortunes during the 1980s and 1990s under the Socialist administration of Felipe Gonzalez that opened up Spain after the Franco dictatorship. But that model, which involved close ties between government and business, came crashing down a decade ago in the financial crisis.

The country today is divided and adrift. Tensions are on display in the streets, where people are angrily protesting the government’s handling on the pandemic, and in company board rooms where executives worry what kind of concessions Sanchez will make to separatists and his anti-capitalist allies.

It’s also reflected in the feud between Sanchez and Prisa, which first blew up in 2016 after two consecutive elections produced no clear majority. Sanchez’s original sin with the Socialist old guard was his refusal to step aside and let the center-right People’s Party govern after his efforts failed to forge an unlikely coalition with centrist pro-business Ciudadanos and anti-establishment Podemos.

Attack Backfires

With Gonzalez helping to shape the newspaper’s coverage from his position on Prisa’s editorial advisory board and open attacks on Sanchez, El Pais rallied internal opposition to the party leader from its opinion pages. Sanchez resigned after losing the backing of the party’s federal committee and, in a television interview at the time, accused Prisa of trying to undermine him.

Cebrian, who was Prisa chairman at the time, said that blaming “the press” for a party decision was “stupid” and “petty.”

Sanchez returned the following year to reclaim the party leadership and became prime minister in 2018.

The mutual distrust remains.

When Sanchez forged a second-term coalition with Podemos in January and promised to bring back protection for workers, many in the establishment feared their business interests were under threat. And the fact that the minority government also relied on votes from separatist parties stirred up old suspicions among more traditional socialists who identify more with Gonzalez and worry about the Catalan challenge to Spain’s territorial unity.

Sanchez was asked about the rift with his predecessor in an interview published Sunday in La Vanguardia, Catalonia’s best-selling daily. He said, “I listen to all the former prime ministers with full attention, but the social and political conditions in our country today are very different from what they were 40 years ago.”

Shake Up

Then along comes Paris-born Oughourlian, who like the embattled prime minister is also an outsider to the Madrid elite and has argued that Prisa has been mismanaged for years. The investor has poured about 300 million euros ($336 million) into Prisa since 2015 and brushes aside reports that he is acting as a front man for Spanish investors who want to take control of the publisher.

His fund pursues an activist strategy by engaging with executives and Oughourlian makes the case that El Pais should have a bigger profile throughout the Spanish-speaking world and textbook publisher Santillana, the company’s largest source of revenue, should deliver more money to investors.

There are already signs that change is coming.Telefonica SA Chairman Jose Maria Alvarez-Pallete toyed with the idea of naming an ally of Sanchez and Oughourlian to the Prisa board, according to two people familiar with his thinking. That would have been a major reversal for the company’s second-biggest shareholder. Pallete has been trying to keep Telefonica out of politics. A spokesman for Telefonica declined to comment.

Oughourlian has already dealt with one of Sanchez’s enemies when he led a push to force out Monzon’s predecessor, Cebrian, in 2017. But he’s still not satisfied with the way the company is being run.

On Monday he’ll have another chance to put that right. The results will be announced around lunchtime.

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