Remember Rumasa

Can you imagine a situation whereby a company buys up every firm in a sector with the clear intention of creating a monopoly?

José María Ruiz Mateos, an incredibly ambitious businessman from Rota (Cadiz) established a company in 1961 that would nearly bring down the entire Spanish economy.

Starting with the acquisition of sherry producers, by 1983, he eventually owned 700 companies with 60,000 employees, and turned over two billion euros annually (today's value).

From Ruiz Mateos's modest start in Rota he built an empire that embraced wine producers, hotels, banks, stores, food producers and insurance.

The sector that figured overwhelmingly was sherry and wine bodegas. Centuries-old firms like Paternina, Garvey, Segura Viudas, Lan, Berberana, Franco-Españolas, etc, all fell into the arms of Rumasa when the right price was offered - though almost never in cash, more usually in Rumasa shares.

The pay-off was to see their products adulterated and over-exploited to a level where recovery would be almost impossible.

Rumasa eventually became so big that if it failed it would cause a catastrophe for the Spanish economy. The Finance minister at the time, Miguel Boyer, decreed that in the public interest Ruiz Mateos's group should be "privatised".

When I knew Ruiz Mateos in Jerez he had just got into his stride as an entrepreneur in the local wine trade, although he had started collecting old clocks for what would eventually become one of his passions.

He had a chip on his shoulder owing to the fact that he was always considered an outsider and an upstart by the sherry aristocracy, and later, when he started acquiring banks, by the established banking families.

When his group was expropriated by the government in 1983, fairly or unfairly (even today the argument continues), it was allegedly insolvent and only questionable accounting practices kept it afloat.

There is no doubt that if Ruiz Mateos had continued his expansion programme the entire sherry business would be under his control, as would many bodegas in other regions.

As a sherry grandee put it later, "Rumasa was closed down just in time. If it had been allowed to continue gobbling up wineries it would have been the end of Jerez."