In Olive-Oil Deal, Citigroup Held Back Amid Spanish Opposition

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The company went on an acquisition spree a few years ago when credit was easy to obtain, buying up olive-oil bottlers and expanding its rice and cookie businesses. When the financial crisis hit, the company was forced to retrench. Deoleo sells roughly half its oil in the recession-hit economies of Spain and Italy, and has sold assets and cut its workforce to reduce debt. Spanish banks that own big stakes in Deoleo put them up for sale last year.

Spanish politicians and olive growers have been keen to hang on to Deoleo.

Susana Diaz, the president of the regional government of Andalucía, the heartland of the Spanish olive-oil industry, said that “it’s fundamental that Deoleo remains an Andalucían and Spanish company.”

Miguel Arias Cañete, the Spanish agriculture minister, said in a radio interview that he hoped Deoleo will benefit from having a private-equity fund invest to boost its export capabilities. “The problem of Spanish olive oil is that we have production capacity of 2 million tons and consume less than 600,000 tons per year in a good year,” he said.

As part of the deal, CVC has agreed to inject up to €100 million in Deoleo by buying newly issued stock in the company.

Italy’s FSI was created in 2011 to help Italian companies grow. Last year, it started an investment vehicle with Qatar Holdings to focus on food, fashion and design. FSI seeks to buy minority stakes in “companies of significant national interest,” according to its website.

“I can understand that the Spanish may perceive a conflict of interest if an Italian company owns Spanish production assets,” said Cass Business School’s Mr. Hahn. “Both governments are extraordinarily, and understandably, sensitive to every possible job loss.”
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