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Ortega protects the family’s stake and control in Inditex

By Angela Gonzalez-Rodriguez

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Spanish fashion mogul Amancio Ortega, the founder of the world's biggest clothing retailer, has put his majority stake in Inditex into a holding company to ensure his family’s control remains unquestionable after his death.

Corporate filings in Spain's Mercantile Registry show Ortega put a 50.01 percent shareholding into Pontegadea Investments in December 2015, along with more than 6 billion euros in prime commercial real estate.

Ortega's heirs will now inherit stakes in Pontegadea, which groups assets worth around 57 billion euro, instead of shares in Inditex which could always be sold, diluting 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 same source, and could partially intend to avoid situations such as those of the founding families of Cadbury or Laura Ashley, who lost control of their businesses as their shareholdings were diluted and they retreated from management.

"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, in a report issued by Reuters.

Meanwhile, independent retail analyst Richard Hyman said the move was a way of protecting the Inditex brands. "The most important asset that Inditex has are its brands and the biggest risk to branding is dilution," Hyman said, adding that "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."

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