Rumasa Case Study

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1.- INTRODUCTION

Rumasa (Ruiz Mateos Joint-stock Company) was a Spanish holding company of companies expropriated by the Spanish government of the PSOE (SPANISH SOCIALIST PARTY) on February 23, 1983, by virtue of the Decree - law 2/1983. The group Rumasa, in the moment to the regulation be published, was constituted by 700 companies, with a staff that was reaching 65.000 persons, invoicing approximately 350.000 million pesetas (more than 2.000 million Euros) annual.

2.- ACTIVITIES OF THE COMPANY

The company was growing and diversifying his activities, turning this way into a corporate group that some were resting to others. Rumasa was present, between others, in the following sectors:

It pays: Bank Atlántico, Bank of Sherry, Banking Masavéu, Exbank, AVA, Eurobank, Banfisa...

Hotel and catering business (Hotel management): Chain hotel "Hotasa", whose hotels had name of animals and plants(floors): " The ", greyhounds " The hound ones "...

- Wine production: Warehouses Paternina, Garvey.

- Department store: Galleries Boasted, popularly known as "Galleries".

- Shops of luxury: Loewe.

-Education: College Izarra.

The emblem of the whole corporate group was a bee, symbol of laboriousness, contained in a hexagon. The Holding company was producing a magazine for his personnel: "The Beehive ".

In the moment of the expropriation, in 1983, the group Rumasa 700 companies constituted it, with a global insole (staff) of 65.000 persons and a turnover (invoicing) of 350.000 million pesetas.

3.- EXPROPRIATION FOR THE STATE.

On February 23, 1983, the Ministers' Council of the Government of Spain decrees [1] the necessary expropriation of the holding company under the protection of the forecasts contained in the articles 33.3 and 128.2 of the Spanish Constitution. The reasons adduced in the decree of expropriation are:

* The repeated lack of external audits to the banks of the group as of his more important societies (from the year 1978).

* The permanent obstruction to the activity inspection of the Bank of Spain.

* The disproportionate risks assumed by the banks that were financing internally to the group with respect of the solvency of the group.

* The inattention to the multiple warnings of the monetary authorities to RUMASA, recommending a more prudent politics (policy) of investments and a disregards of risks.

* The risky spiral of acquisitions and investments of the group.

The government used the expropriation, instead of the least traumatic formula of intervention of only the banks, for the complexity of the studding of the group and on not having considered the problems like relating to the moment, but structural.

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