Thursday 27 April 2017

Ortega looks to preserve family stake in Zara-owner Inditex

Sonya Dowsett

Amancio Ortega, founder of the world's biggest clothing retailer Inditex and Europe's richest man, has put a majority stake in the firm that owns the Zara fashion chain into a holding company to ensure family control remains unassailable after he dies.

Corporate filings in Spain's Mercantile Registry show the reclusive 81-year-old put a 50.01pc shareholding into Pontegadea Investments in December 2015, along with more than €6bn ($6.5bn) in prime commercial real estate.

Ortega's heirs will now inherit stakes in Pontegadea, which groups assets worth around €57bn, rather than Inditex shares which potentially could be sold, muddying prospects for the company's direction.

"The absolute priority for Ortega is to guarantee the future of the company, to ensure a controlling stake in Inditex that will not be diluted," a source close to Pontegadea told Reuters when asked about the reasoning behind the structure.

The move aims to preserve continuity in ownership and management, said the source, who asked not to be named because of the sensitive nature of the issue.

It also is likely to maintain the firm's paternalistic presence in the north-western region of Galicia, where Mr Ortega lives.

A former errand boy, he built his empire in the mid-1970s from a Zara store in his hometown, the rainy fishing port of La Coruna, to a network of over 7,200 stores that employs tens of thousands globally.

His success has had a huge knock-on effect on local businesses in Galicia, from Trison, which makes video displays for Zara stores, to Candido Hermida, a furniture maker which fits out Inditex stores worldwide.

His charitable foundation, Fundacion Amancio Ortega, has invested millions in projects such as opening kindergartens in the region and training local schoolteachers.

In setting up Pontegadea, Ortega aims to avoid the fate of businesses like chocolate maker Cadbury and fashion house Laura Ashley, whose founding families lost control of their empires as their shareholdings were diluted.

Ortega also follows the example of other founders of successful corporate empires.

"Depending on the terms of the trust, this should help alleviate any fears of shares being placed in the market on the event of his (Ortega's) death," said Adam Cochrane, retail analyst at UBS.

Independent retail analyst Richard Hyman said the move was a way of protecting the Inditex brands, which in addition to Zara include the upmarket Massimo Dutti label and teen fashion chain Bershka.

"The most important asset that Inditex has are its brands and the biggest risk to branding is dilution," Hyman said.

"It is hard to predict what is going to happen in the apparel industry, the most risky sector in retail. Protecting a majority stake reduces the chances of a takeover that could lead to cost cuts that end up damaging the brand."

Mr Ortega became a billionaire and Spain's richest man at the age of 65, when Inditex was listed in 2001. He continues to live in La Coruna where he is often seen walking his dog.

He has three children: his daughter with Perez, Marta (33), who works at Zara, and two children from his first marriage, Sandra (48) and Marcos (46), neither of whom have pursued careers at Inditex.

The tycoon himself still goes to work every day at the company's headquarters. (Reuters)

Irish Independent

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