Billionaires in battle: the struggle for power at the top of Italy’s financials

In 2018, the Italian billionaire Leonardo Del Vecchio returned to his birth city and offered to invest 500 million euros in the country’s main cancer hospital.

Milan’s Istituto Europeo di Oncologia’s refusal to accept the money set the stage for a battle now raging at two of Italy’s most important financial institutions: Mediobanca, long a powerful broker in the corporate sector. of the country; and Generali, Italy’s largest insurance company.

Del Vecchio, founder and president of the world’s largest eyewear company Luxottica, took the rejection as a personal opinion and blamed it on the hospital’s biggest advocate, the bank. Mediobanca investment. 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 feud between Del Vecchio and Nagel goes back to the canceled investment. That’s where all these tensions begin,” says a prominent Italian businessman who understands both issues well.

Del Vecchio, an important investor in both Generali and Mediobanca, has challenges Mediobanca relies on its 13% stake in Generali for profits. At the same time, he and other Generali shareholders are engaged in a battle with Mediobanca over the future of the group and its management under chief executive Philippe Donnet.

A key ally in Del Vecchio’s campaign against Generali’s management is Francesco Gaetano Caltagirone, the 78-year-old construction mogul who is Generali’s vice president and also an investor in Mediobanca.

In September, Caltagirone and Del Vecchio, the insurance company’s second and third largest shareholders after Mediobanca, signed a formal agreement with another smaller investor to consult on decisions. Generali’s annual meeting scheduled for next April. The group jointly owns 14% of its shares.

Andrew Ritchie, a senior analyst at research group Autonomous, said Generali’s strategic date next month, when investors will hear about its three-year plan, will be a “critical moment.” in the shareholder war.

He expects “much of the same” from Generali, which focuses on earnings growth and investor returns, adding: “That will require feedback from agitated shareholders to say they have What could be done better?”

This struggle for control involving two of Italy’s top financiers and an elderly pair of billionaires highlights the personal rivalry and stake entanglement that dominates the country’s financial sector. “This is not a battle for power, it is a battle for efficiency,” said a spokesman for Caltagirone, who has increased his stake in Generali from 1 to 8 percent over the past 12 years.

Del Vecchio’s role as an industry power player came quite late in his career. Immediately after his donation to the Milan cancer hospital was rejected, he surprised the Italian financial community by announcing his holding of a 7% stake in Mediobanca. He now owns just under 20%, the maximum allowed under the deal he reached with the European Central Bank.

He has used his position as Mediobanca’s largest investor to push for 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 from Compass Banca, a consumer credit company. .

Up to a third of Mediobanca’s revenue comes from Generali holdings.

A close ally of Del Vecchio said: “For the first time, Nagel was pressured to actually do something. “People think this is the last game – there’s an atmosphere in the air that something needs to change.”

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

Under the agreement between Del Vecchio and Caltagirone, the two sides agreed to consult each other on how to achieve “more profitable and efficient management” of the insurer.

The banking institution Fondazione CRT has also signed the pact, and Del Vecchio and Caltagirone hope the powerful Benetton family, which owns a 4% stake in Generali, will join.

The alliance brought Del Vecchio and Caltagirone into a collision with Nagel and Mediobanca, who supported Generali’s stewardship. Mediobanca responded by borrowing a 4% stake in Generali, increasing its stake to more than 17%. Mediobanca’s voting rights on the borrowed shares will expire immediately after Generali’s AGM.

To complicate matters further, Italian MPs recently proposed a legal reform to come into force, introducing a six-year limit on the tenure of top corporate executives and members. administrative Council. This will affect Donnet and Gabriele Galateri di Genola, president of Generali since 2011, and could be important for Nagel going forward.

Generali’s approach to technology and M&A strategy are two points of contention between the insurer’s management team and the coalition of stakeholders involved. A person close to Delfin, Del Vecchio’s parent company, called Generali a “fintech laggard” and said its recent trading activity was “a mixed string of large-scale flag-planting small and doubled in traditional Italy, where it was dominant”.

Critics see Generali’s acquisition of struggling local rival Cattolica as a better deal for the Italian economy than for Generali’s shareholders. People close to Caltagirone said the Cattolica deal was “too late”. Generali has lagged behind its peers in terms of market capitalization over the past two decades.

Bar chart Market value (€ billion) shows that Generali has lagged behind its peers in terms of market capitalization

“Generali needs to figure out how to grow organically or [through M&A] puts it on par with the likes of Zurich, Axa and Allianz, who led Generali if you look back to the early 2000s,” said one major shareholder.

But advocates point out that Generali’s stock has generally outperformed its rivals since Donnet’s last strategic plan was launched three years ago. Since then, Generali’s shares have risen about 24%, compared with 5% in Allianz, 15% in Axa and 25% in Zurich.

Another criticism made at Generali was that Mediobanca, its largest shareholder, had too much of an influence on the insurance company. Generali’s longtime president, Di Genola, served as president of Mediobanca until 2007.

Generali declined to comment for this article. But one person with knowledge of its views said the story of Mediobanca’s influence on Generali was “outdated”.

“If you look at the business decisions that have been made by Generali – M&A, strategic, you name it – it is not possible to see something that has been done for the benefit of a particular shareholder. not all shareholders,” this person said.

Del Vecchio and Mediobanca also declined to comment.

Stock price line chart (rising back at 100) showing European insurers

The question is whether any new strategy can win over Generali’s rebellious shareholders — or at least prevent institutional investors from rallying to their side.

Another person close to Generali’s management accused Del Vecchio of “strategic neonatalism”, adding: “He wants Generali to be the biggest insurer in Europe, if not the biggest insurance company in the world. is in the world, but how to do that is not clear.”

A former executive of an Italian financial group said he did not expect the two sides to reach a compromise before the AGM. “Billionaires never give up,” he said.

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

Additional reporting by Stephen Morris in London

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