Thursday12 March 2020 ★ FINANCIAL TIMES 13
COMPANIES
O L I V E R R A L P H— LONDON
Prudential s to float a minority stakei
in its US business,Jackson, as it
responds to pressure from activist
investor Third Point or a fullf
break-up.
The UK-based insurer saidyesterday
that a partial initial public offering of
the business would give it the resources
to expand.
Prudential chief executiveMike Wells
said: “In order to diversify at pace, Jack-
son will need access to additional invest-
ment, which we believe would best be
provided by third parties.”
The company did not lay out a time-
line for theproposed IPO, or say how
much of the group it would look to list.
Shares in similar US retirement compa-
nies have been hit hard byrecent stock
market volatility.
Mr Wells said Jackson, which is based
in Michigan, was “in extremely good
shape from a standalone point of view”.
Analysts at Citi have valued Jackson at
about £6.5bn.
“This is a good move,” said Barrie Cor-
nes, analyst at Panmure Gordon, adding
that it would “give a proper valuation to
the US business that is currently lacking
within the combined group valuation.”
Prudential’s share price was down 3.
per cent n response to the news.i
Third Point, the activist investor led
byDan Loeb, last month announced
that it had bought a 5 per cent stake in
Prudential and called on the board to
split Jackson from the group’s fast-grow-
ing Asian business and close the London
head office.
The partial IPO announced by theinsurer falls short of the full split that
Third Point had demanded.
Mr Wells defended Prudential’s deci-
sion to keep a London head office: “Lon-
don has a deep bench in financial serv-
ices,” he said. “In any scenario, you’d
want to tap into the talent you get in this
market.”
Prudential also announcedresults for
2019, which showed that adjusted oper-
ating profits rose by a fifth to $5.3bn.
The company made no change to its
progressive dividend policy, which
Third Point had criticised as “short-
sighted” as it reduced the amount of
money available to invest.
Prudential declared a second interim
dividend of 25.97 cents per share.
Mr Wells said the coronavirus out-
break had “slowed economic activity
and damped our sales momentum in
Hong Kong and China.”
He added: “Given these conditions,
lower levels of new sales activity in
affected markets are to be expected
with a consequential effect on new busi-
ness profit.” He said that to date, claims
from the virus had been “minimal”.
See LexInsurance
Pru to float minority stake in Jackson unit
O L A F STO R B E C K —FRANKFURT
US shareholders hope to take more
than 70 current and former board
members ofDeutsche Bank nda Bayer
to court in two civil lawsuits seeking
damages for their alleged personal
responsibility in allowing corporate
misconduct.
Among the named defendants in the
lawsuits, which have been filed to the
Supreme Court of the State of New York,
are Deutsche and Bayer’s respective
chief executivesChristian Sewing nda
Werner Baumann, and their chairmen
Paul Achleitner nda Werner Wenning.
The lawyers also named former Deut-
schechief executivesJosef Ackermann
andJohn Cryan, as well as former co-
CEOsAnshu Jain nda Jürgen Fitschen.
The lawsuits have been filed by two
small US-based shareholders in the
companies. The plaintiffs are not seek-
ing damages for themselves but are
demanding that the board members
compensate Deutsche and Bayer for the
alleged harm caused by their actions.
“The lack of proper governance at
Bayer and Deutsche Bank allowed man-
agement and the supervisory board to
saddle the companies and their share-
holders with billions of dollars in losses,”
said Michelle Ciccarelli Lerach, plaintiff
attorney in both cases.
In Deutsche case, the lawyers point
to an “unprecedented litany of wrong-
doing by Deutsche Bank’s managers and
supervisors” which left the lender’s
finances “gravely impaired and its long-
term survival in doubt”.
The lawsuit also mentions “price fix-
ing, sanctions violations, money laun-
dering, critical deficiencies in its capital
planning practices, financial reporting
failures, inadequate... controls and
procedures, bribery and... other
breaches of fiduciary duties”.
Deutsche’s share price has fallen
nearly 90 per cent over the past decade
and the bank has paid billions of euros
in fines and settlements relating to other
legal cases.
In Bayer’s case, its 2016 takeover of US
seedmakerMonsanto as exposed theh
German group to close to 50,000 claims
from cancer patients over the allegedcarcinogenic effects of Monsanto’s
weedkiller Roundup.
The plaintiffs focus on the Monsanto
takeover, arguing that Bayer’s due dili-
gence was flawed, and accuse executives
and supervisors of ignoring red flags
that indicated how risky the transaction
would be.
The plaintiffs are trying to invoke
German capital markets law but want
the cases to be heard in New York City.
“It is not uncommon that foreign
courts apply German law and vice
versa,” said Thilo Kuntz, a securities law
professor at Bucerius Law School in
Hamburg, adding that “the first big hur-
dle in this case will be to convince the
New York court to accept it at all”.
Bayer told the Financial Times that
the complaint was “without merit, both
as a matter of fact and law”, and that it
would defend the claim “vigorously”.
Deutsche Bank said: “This is a Ger-
man corporate law issue regarding a
German corporation which the German
courts are best equipped to properly
consider. Respectfully, we believe it
does not belong in the New York courts.”Financials
US lawsuits target Deutsche and Bayer chiefs
Third Point, led by Dan Loeb, has
acquired a 5% holding in PrudentialDA N I E L D O M B E Y— MADRID
In an unassuming London side-street
sits the UK office of aSpanish company
that ownsAmazon’s Seattle headquar-
ters, a large chunk of Oxford Street, and
most ofInditex, the retailgroup.
Pontegadea s the personal invest-i
ment company ofAmancio Ortega,
founderof Inditex, which is best known
as owner of theZara hain. Mr Ortega,c
who started out running afamily busi-
ness making dresses and dressing-
gowns in 1963,is theworld’s sixth-rich-
estperson, according to Forbes. Ponte-
gadea, founded in 2001 to invest his div-
idends from Inditex, has become a
property buyer on abig scale.
When the company started t had ani
annual pot of€50m. Today,“each year
we have to invest around €2bn”,Rob-
erto Cibeira, Pontegadea hief execu-c
tive,said. “That’s what we get from our
real estate and other investments plus
the Inditex dividend.”
Pontegadea, which ike Inditexl si
based near the north-western Spanish
city of A Coruña, says itowns more of
London’s Oxford Street than anybody
else. As well as Amazon’s Seattle HQ, it is
landlord ofFacebookoffices inthat city
and properties on the Champs-Élysées,
Madrid’s Castellana Avenue, and
Rome’s Via del Corso.
Late last year t took advantage of thei
Brexit discount in the UK property mar-
ket to make the most recent in a series of
acquisitions in London: the headquar-
ters of consultancyMcKinsey or aboutf
£600m, one of five property invest-
ments it madein 2019.
Yet Pontegadea has a dedicated
investment staff of just seven, who are
increasingly stretched as competition
for property heats up, with investors on
the hunt for returns.
According to Mr Cibeira, Pontegadea’s
real estate portfolio has an acquisition
value of€13bn, making it by far the
biggest operator in the Spanish market
and outranking direct European
competitors.
José Arnau, vice-president of both
Inditex and Pontegadea, acknowledged
that the companyneeded to grow. The
headcount at Pontegadea and at Mr
Ortega’s associated companies is barely
more than 70. At the same time hesaid
that, with175,000 people working at
Inditex, the 83-year-old Mr Ortegahad
little interest in creating a much larger
organisation.
Pontegadea, which buys only free-
holds and almost never sells, gener-
ates income from its investments of
about €800m a yearand has less
than €1bn in debt.
Although it makes other invest-
ments, its biggest holding
r e m a i n s I n d i t e x.
Between them, Ponte-
gadea andPartler,
another Ortega
company with the
same manage-
ment, own 60
per cent of the
group, with avalue of€58bn. That yielded€1.6bn in
dividends last year. Mr Cibeira put het
value of the Pontegadea group of com-
panies, which make charitable dona-
tions of some €100m a year, at€70bn.
“The fact that our portfolio is so con-
centrated in Inditex has a big impact on
the other kinds of investments we can
make from a risk management iew,” hev
said. “We are not looking for enormous
returns; we are looking for investments
that protect us, that produce a constant
cash flow and which maintain the value
of the capital. We are also looking for
investment that avoids a conflict of
interest with Inditex. That means keep-
ing a low profile.”
He said 35 per cent of the group’s real
estate portfoliowas in the US, with
another 30 per cent in the UK nd 25a
per cent in Spain. “Because we come
from retail, we know the impor-
tance of good location, and 95 per
cent of our properties are in
prime areas.”He said Pontegadea owned the sites of
six flagship Apple stores, more than any
other landlord if stores in shopping cen-
tres were excluded.
But finding property that can produce
the returns Pontegadea wantsgrows
more difficult,because of the influx of
institutional investors looking for yield
in a world of ultra-low interest rates.
The retail sector isstruggling as never
before, though Pontegadea insists this
has caused it few problems ecause itb
focuses more on prime retail andoffices.
Rising property prices in Spain and
France have deterred Pontegadea from
making real estate purchases in both
countries for the past three years. But it
has made some Spanish transactions. In
2018 and 2019, the group bought minor-
ity stakes inTelxius,Telefónica’s tele-
coms infrastructure business, andEna-
gas, whichruns Spain’s gas grid, for
€379m and €282m respectively.
Pontegadea has continued to invest in
UK property, partly because prices havebeen limited by Brexit. “The financial
industry in London is going to last,” said
Mr Cibeira. “London has certain things
no other city has.”
Hesaid the US, Australia, Singapore
and South Koreawere the most promis-
ing growth areas.
Pontegadea believes its lack of debt
and tiny size make decision-making and
transactions much faster. Its five-per-
son board consists of Mr Ortega, his wife
Flora Pérez, Mr Arnau, Mr Cibeira and
the company secretary.
Mr Ortega remains executive chair-
man of Pontegadea, a post he has given
up at Inditex, and is fully involved in
strategic, if not day-to-day, decisions.
But Mr Cibeira and Mr Arnau main-
tain that the group will endure, despite
the age of its owner.
“We have an enormous quantity of
dividends that we have to reinvest, and
therefore we have a size that we never
thought we were going to have,” said Mr
Arnau. “Life has taken us here.”Inditex mogul’s
investment arm
faces property
challenge
Pontegadea team increasingly stretched as
competition heats up amid hunt for returns
The investment
company of
Amancio
Ortega, below,
owns much of
Oxford Street
Charlie Bibby/Iago Lopez/APThe real
estateportfolio
has anacquisition
value of€13bn
MARCH 12 2020 Section:Companies Time: 3/202011/ - 16:36 User:andrea.crisp Page Name:CONEWS2, Part,Page,Edition:USA , 13, 1