Spain abandons lottery privatisation on price

Spain abandoned a giant privatisation of the national lottery at the last minute because the market price was unacceptably low, the government said on Thursday. The expected October sale of a 30-percent stake in the lottery, famous for doling out a wealth of prizes in its Christmas draw El Gordo, or the Fat One, would have been the biggest privatisation in Spain's history. It had been expected to raise up to 7.5 billion euros ($10 billion) to help finance Spain's fast-growing sovereign debt, a major concern of global financial markets. Managers of the privatisation informed the state lottery only on Wednesday that they were not sure of getting the desired price for a sale of the 30-percent stake, Finance Minister Elena Salgado said. "Rather than have it valued for less than we had expected and for less than we believe to be the fair value, we decided to delay this listing," she told state radio RNE. The state had planned to sell the stake in Loterias y Apuestas del Estado to both institutional investors and the public. "Among individual investors there was and still is an extraordinary interest and among institutional investors too, but at prices that we did not want to accept," Salgado said. Spain would have used the income from the sale to pay down the growing pile of state debt. But the government was not relying on the sale to meet its ambitious targets to slash the annual shortfall in public spending, Salgado said. The climbdown came less than two months after the Socialist government brought forward the sale by a month to October, before November 20 elections it is widely expected to lose to the conservative Popular Party. The sale was formally approved by the cabinet only on Friday -- just five days before its surprise postponement. On the eve of Wednesday's cancellation, the Popular Party, riding high in the polls, had warned it would halt huge privatisations of the national lottery and airports and review the process if it took power. Alberto Roldan, analyst at brokerage Inverseguros, said rumours had been circulating that a victorious Popular Party might change the gambling legislation that gives a monopoly to the national lottery. "If the opposition party, which seems likely to be the election winner, threatens to change the gambling law, the lottery loses its attraction," Roldan said. That threat was enough to scare away investors and prompt the cancellation, he said. Salgado stressed that the sales of more than 90 percent of the management contracts for Madrid-Barajas and Barcelona-El Prat airports due in November were not being delayed. The two airport contract sales were expected to bring in about 5.3 billion euros. The sale of the management contract for the two biggest airports was a "different process" to the lottery sale, the finance minister said, and much of the price would be paid over the term of the concession. The government has also launched the process for the sale of 49 percent of state-owned airport operator AENA but it has said the date will be decided depending on market conditions. Spain has promised to reduce its annual public deficit from the equivalent of 9.2 percent of gross domestic product last year to 6.0 percent of GDP this year, 4.0 percent in 2012 and 3.0 percent -- the EU limit -- in 2013. It is now scrambling to raise extra money in 2011 to meet those targets -- telling firms to pay tax installments early, lowering state spending on medicines and stimulating new home purchases with a tax cut. Each year of deficit pushes up overall debt, which grew to 65.2 percent of GDP as of June 30 from 57.2 percent a year earlier.