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Lamikiz Garai lights a spark in Spain

Basque lawyer Fernando Lamikiz Garai is discovering the difficulties of shareholder activism. In December Lamikiz Garai and 100 colleagues at his law firm placed ads in major newspapers, seeking investor support to block the merger of Spain's two biggest electrical utilities, Endesa and Iberdrola.

Now, in the country's first major shareholder rights battle, the lawyers are confronting an array of powerful foes.

The fight began after Iberdrola rejected a E17.2 billion ($16.2 billion) half-cash, half-stock offer from Gas Natural, which is controlled by Repsol, Spain's largest oil company. To escape Repsol,s clutches, Iberdrola's management jumped at a E15.2 billion bid from Endesa, payable largely in stock. Endesa's share price fell almost immediately; investors worried about a lengthy and potentially disruptive integration process. As a result, the deal is now worth only E12.7 billion to shareholders.

For Lamikiz Garai, who says he and his fellow lawyers have a small Iberdrola holding, the deal,s sticking point is the price: 26 percent less than Repsol offered. "Management at Iberdrola has no interest in accepting the best offer for shareholders," he says.

The 41-year-old partner in Ibarrondo-Lamikiz claims to have the support of more than 5,000 mostly retail shareholders, representing a total of 5.3 percent of Iberdrola's stock. To block the deal, he needs at least 15 percent to vote against it at a meeting expected to be held in March.

"It is not just Endesa and Iberdrola but also the Spanish government that is against us," Lamikiz Garai says. The conservative government of José María Aznar has sweeping powers to block mergers. Spain's economic minister, Rodrigo Rato, successfully pressured Repsol not to launch a hostile bid for Iberdrola after its offer was spurned.

If the government approves the merger this month, as many expect, the vote's arbiters will be the utility,s biggest shareholders: Banco Bilbao Vizcaya Argentaria and Bilbao Bizkaia Kutxa, which hold 9.5 percent and 5 percent, respectively, of Iberdola. The buzz in Madrid is that Aznar is cajoling the two banks to permit the union. But Lamikiz Garai insists that he isn,t tilting at windmills: "We want our case to be the start of a broader shareholder activism in Spain."

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