GECINA: Alteco Import and MAG, Spanish investment companies, shareholders holding a 31% stake in Gecina filed for bankruptcy … an opportunity to return to this Paris real estate trust company whose recent history reflects the vulnerability of our listed companies.
For the April 2008 AGM of GECINA Proxinvest recommended to oppose the vote of the special report on regulated agreements beacause of a € 10m to advance to a Bami Newco for the acquisition of a land located in Madrid, a transaction involving the CEO Jocquin Rivero which seemed poorly documented for the shareholders.
At the same meeting of 2008 the fourteen members Board was reelected for three years, with eight positions for representatives of the Spanish Metrovacessa group (26.8%), and teh alliance of the Soler (16.1%) and Rivero (15.3 %) families, with two positions Predica (Messrs. Hocher and Duchamp), and four “independent” directors including MM. Aldo Cardoso and Philippe Geslin (former director of Indosuez Crédit-Agricole).
But this year, at the last 2012 AGM, on a question from Colette Neuville,the Chair of the ADAM sahreholders association, GECINA admitted that its former CEO Joaquín Rivero had been interested in operations of the order of € 350 million with the required proviion for losses of $ 206 million.
The CEO of the company Gecina having engaged in various operations in Spain for even more than € 400 million ADAM had fortunately filed in 2009 a complaint for breach of social good. Among these operations Joaquin Rivero acquired in 2009 for € 109 million 49% of Bami, a Spanish company belonging to him and his partner in Gecina’s capital Bautista Soler, an asset which forced a depreciation of 77% at the end 2009 and of 100% by 30 June 2010. Then came the acquisition of Eiffage shares, a loan to Bamolo for the purchase of not buildable and undivided land and the investment in society Sanyres.
From 2009 the scene was set: Proxinvest continued to oppose vigorously to regulated realted party agreements and ADAM even requested the AGM to dismiss removal of bebefiting directors Joaquin Rivero and Antonio Truan. The dismissal vote received a score of 4%, a majority of the directors still supporting Joaquin Rivero but reached a remarkable 20% in 2010.
On 16 February 2010 the Board appointed Michel Bernard, CEO of Predica, the insuarnce subsidiary of Crédit Agricole, as chairman of the Company since 2010, and the company filed a civil party action alongside the ADAM in April 2010. But it waited another two years for otaining in early 2012, following concealment of € 10 million in guarantees, the departure of former CEO Joaquin Rivero who remained CEO supported by the majority shareholders.
How to explain this delay while the company had to burn € 600 million in provisions in 2011 and saw melt half of its expected results at the end of 2011?
The first reason may be banking: Crédit Agricole is the banker in Spain shareholder groups: although his entry into the capital via Predica owes nothing to its acting as lender, the interest of the banking group serving the Spanish sharehodlers in Spain, was probably to keep their clients afloat. The chair of ADAM, Colette Neuville, considers that the debt of shareholders is a serious problem in this case as in that of Lagardère, Yellow Pages, Carrefour, Belvedere. Colette Neuville recommends that information on the debt of major shareholders and the potential and actual pledging of shares as collateral securities be communicated to companies and their shareholders with the name of the beneficiary banks.
The second reason is probably the paralysis of a board dominated by three Spanish shareholders totaling 56% of the shares.
The chairman Michel Bernard, defends at the 2012 AGM that “the distribution of seats reflects the distribution of capital. Metrovacesa, the group and the groups Soler and Rivero, who hold respectively 26.8%, 16.1% and 15.3% of the share capital, are represented by four, two and two directors to the Board, i.e. eight out of fourteen “.
But if the rules of the game in terms of transactions are not applied shareholders in control can freely loot the company thanks to the support of a majority of directors. Should not a majority of independent directors be required in all Boards as requested by the FRC and the FSA in the UK?
The third reason is obviously complacent individual independent directors meet interested, remember that administrators vote without interest when passing conventions in Council.
It should be noted at the time that the audit committee of 2008 was chaired by Mr. Philippe Geslin, and had Mr. Patrick Arrosteguy, Jose Gracia Barba, Jean-Yves Hocher and Emilio Zurrutuza as members. Besides a Coordinating Committee “seized investment projects outside the scope of current activities of the society” as well as “an update on possible improvements in the functioning of the Board of Directors’ : its members also counted as Philippe Geslin, Serafin Gonzalez Morcillo and Aldo Cardoso which were also all found in an AD HOC committee created in July 2008 to “study a possible investment.”
All this work earned their authors’ fees for 2008 totaling € 220,450 for Philippe Geslin, 170 00 € for Patrick Arrosteguy, 127 000 115 00 Serafin Gonzalez Morcillo € Jean-Yves Hocher, € 104 000 for Aldo Cardoso.
Fourth cause: the auditors, Price Waterhouse (Eric Bull owner, Pierre Coll alternate) and Mazars (Guy Isimat-Mirin, owner, Patrick Cambourg, alternate), did they performed their job well?
Apparently yes, as some of the operations were mentioned in the special report, obviously not all, as some bank guarantees were concealed to directors and likely to auditors.
Crearly No, since some clearly detectable related conventions, denounced by GECINA employees to ADAM were not brought to the special report, and that even if Proxinvest, unlike other proxy firms, recommended to oppose, most of the voting shareholders accepted the resolution.
These same auditors left teh intersted shareholders voting at the general meeting in defiance of the law, since Gecina reports the same basis of calculation for all resolutions and for the vote of the special report for other resolutions.
Finally, a fifth and final reason for this decline, not the least, is to be found among minority shareholders, representing 40% of the capital, as two directors associated from the beginning with the two suspicious transactions of the Spanish shareholders, Mrs. Victoria Soler and the Metrovacesa company, were re-elected largely with 95 and 96% of teh votes in the spring 2012.
Proxinvest October 3, 2012
