Billionaires in battle: power struggle at the forefront of Italian finances

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Italian billionaire in 2018 Leonardo Del Vecchio returned to his hometown and offered to invest 500 million euros in the largest cancer hospital in the country.

The refusal of Milan’s Istituto Europeo di Oncologia to accept the money set the stage for a battle now being fought over two of Italy’s most important financial institutions: Mediobanca, long a power broker in the country’s corporate sector; and Generali, Italy’s largest insurer.

Del Vecchio, founder and chairman of the world’s largest eyewear company Luxottica, took the rejection as a personal disgrace and blamed the hospital’s largest financier, the investment bank Mediobanca. This has led to tension between Del Vecchio and the bank’s chief executive, Alberto Nagel, according to several people with knowledge of the relationship.

“The enmity between Del Vecchio and Nagel goes back to the aborted investment. That’s where all this tension started, ”said a well-known Italian businessman who knows both well.

Del Vecchio, a major investor in Generali and Mediobanca, has challenged The reliance on Mediobanca on its 13 percent stake in Generali for profits. At the same time, he and other Generali shareholders are waging a tug-of-war with Mediobanca over the future of the group and its management under the chairman of the board, Philippe Donnet.

A key ally in Del Vecchio’s campaign against Generali’s management is Francesco Gaetano Caltagirone, the 78-year-old builder, Generali Vice-Chairman and Mediobanca investor.

In September, Caltagirone and Del Vecchio, the insurer’s second and third largest shareholders behind Mediobanca, signed a formal pact with another smaller investor to deliberate decisions ahead of Generali’s annual meeting next April. The group together owns 14 percent of its shares.

Generali’s Strategy Day next month, when investors hear their three-year plan, will be a “turning point” in the shareholder war, said Andrew Ritchie, a senior analyst at Autonomous research group.

He expects “more of the same” from Generali and focuses on profit growth and investor returns.

This battle of control between two of Italy’s leading financial institutions and two aging billionaires underscores the personal rivalries and entangled holdings that dominate the country’s financial sector. “This is not a struggle for power, but a struggle for efficiency,” said a spokesman for Caltagirone, which has increased its stake in Generali from 1 to 8 percent over the past 12 years.

Del Vecchio’s role as ruler in the industry came relatively late in his career. Shortly after his donation to the Milan Cancer Hospital was rejected, he surprised the Italian financial world when he announced a 7 percent stake in Mediobanca. He now owns almost 20 percent, the maximum that is allowed under an agreement with the European Central Bank.

He has used his position as Mediobanca’s largest investor to drive governance reforms and has also put pressure on Nagel to reduce the bank’s reliance on dividends it receives from Generali, where it is the largest shareholder, and Compass Banca, a consumer credit company, receives.

Up to a third of Mediobanca’s income comes from the Generali holding company.

“For the first time, Nagel was pressured to really do something,” said a close ally of Del Vecchio. “People think this is the final showdown – there is an atmosphere in the air that needs to change.”

Alberto Nagel, Managing Director of Mediobanca. Nagel is under pressure to reduce the bank’s reliance on the dividends it receives from Generali © Miguel Medina / AFP / Getty Images

As part of the pact between Del Vecchio and Caltagirone, the two have agreed to advise each other on how to achieve “more profitable and effective management” of the insurer.

The Fondazione CRT banking foundation has also signed the pact, and Del Vecchio and Caltagirone hope that the powerful Benetton family, who own 4 percent of Generali shares, will join.

The alliance has put Del Vecchio and Caltagirone on a collision course with Nagel and Mediobanca, who support Generali’s management. Mediobanca has responded by borrowing 4 percent of Generali’s shares and increasing its stake to more than 17 percent. Mediobanca’s voting rights to the loaned shares expire immediately after the Generali General Meeting.

To further complicate matters, Italian MPs recently proposed a legislative reform that would limit the tenure of top managers and board members of companies to six years. This would affect Donnet and Gabriele Galateri di Genola, Generalis Chairmen since 2011, and could be important for Nagel in the future.

Generali’s technology approach and its M&A strategy are two points of contention between the insurer’s management team and the aggrieved shareholders’ Allianz. A person close to Delfin, Del Vecchio’s holding company, called Generali a “fintech laggard” and said its latest deal was a “mixed mix of small flag plantings and doubles in traditional Italy where it already dominates”.

Critics see Generali’s recent takeover of troubled local rival Cattolica as the kind of deal better for the Italian economy than Generali’s shareholders. People near Caltagirone said the deal with Cattolica was “too little too late”. Generali has fallen behind the competition in terms of market capitalization over the past two decades.

“Generali has to find a way to grow organically or [through M&A] It is on par with corporations such as Zurich, Axa and Allianz, which, if you look back on the early 2000s, have all taken the lead over Generali, ”said a major shareholder.

Proponents point out, however, that Generali stocks have generally outperformed the competition since Donnet’s last strategic plan was launched three years ago. Since then, the Generali share has risen around 24 percent, compared with 5 percent at Allianz, 15 percent at Axa and 25 percent at Zurich.

Another point of criticism of Generali is that the largest shareholder, Mediobanca, has an overwhelming influence on the insurer. The long-time chairman of Generali, Di Genola, was the chairman of Mediobanca until 2007.

Generali declined to comment on this article. But one person familiar with his point of view said the narrative of Mediobanca’s rule over Generali was “out of date”.

“When you look at Generali’s business decisions – M&A, strategic, whatever – it’s impossible to see where something has been done for a particular shareholder rather than all,” the person said.

Del Vecchio and Mediobanca also declined to comment.

Line chart of share prices (rebased to 100) showing European insurers

The question is whether a new strategy can win over Generali’s rebellious shareholders – or at least prevent institutional investors from taking their side.

Another person close to Generali accused Del Vecchio of “strategic infantilism” and added: “He would like Generali to become the largest insurance company in Europe, if not the world, but it is not clear how to do this. “

A former CEO of an Italian financial group said he did not expect the two sides to reach a compromise before the general meeting. “The billionaires will never give up,” he said.

“Too much money is at stake, but their reputation, legacy and pride are also at stake at the end of their lives. It is very difficult to find a compromise with them. “

Additional coverage from Stephen Morris in London


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