Distrust, politics sink Spain lottery sale: analysts

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Weak market confidence in Spain and pre-election political pressures forced its government to abandon a massive privatisation of its national lottery at the last minute, analysts say.

The stock listing would have been the biggest privatisation in Spain's history but the government dropped it late Wednesday when it realised the shares would not fetch the price it wanted, Finance Minister Elena Salgado said.

The government had hoped the sale of a 30-percent stake in the popular lottery -- known for doling out riches in its Christmas draw El Gordo ("The Fat One) -- would yield 7.0 billion euros ($9.5 billion) to help ease its debts.

But despite the profitability of the lottery, which made profits of 2.6 billion euros in 2009, observers saw the scuppering of the plan as the natural result of market and political pressures.

"Now is not a good time to be selling anything," said Gayle Allard of the IE Business School in Madrid -- even the big fat lottery that has Spaniards crowding to buy tickets in the street at Christmas.

Investors are nervous about Spain's ability to pay off its debts amid grave instability in other indebted eurozone countries such as Greece. In this context, the failure of the lottery sale hurts Spain's credibility further.

"It gives a very negative message," said Alberto Roldan of Spanish investment group Inverseguros. "There is great distrust of the government and there is also the fact that the share offering bore the name of Spain."

Observers also said resistance to the privatisation by the Popular Party (PP), the conservative opposition party widely expected to win the November 20 general election, helped scupper the deal.

The PP's economic spokesman Cristobal Montoro said Tuesday if the party won power it would halt the privatisation of the lottery as well as that of two major Spanish airports, saying it would mean "selling state assets at a loss".

"It is very curious that scarcely two days after Montoro said that, the government cancels the sale," Roldan said.

The threat of the PP intervening in the lottery and rumours that it plans to reform the gambling laws if it wins the election made the sale "lose its attractiveness" for investors, he added.

"What investor would want to buy it with such uncertainty?"

Soledad Pellon, a market strategist at IG Markets investment group, cited the same politically-driven investor concerns.

"It is a business with steady revenues, with a monopoly and few debts," she said, but due to the uncertainties over the fate of the lottery after the election, "institutional investors did not want to take part in the sale."

Salgado said the sales of more than 90 percent of the management contracts for Madrid-Barajas and Barcelona-El Prat airports, expected to bring in 5.3 billion euros, were not being delayed. The PP has vowed to scrap these too.

© 2011 AFP

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