Billionaires in battle: a power struggle at the helm of Italian finance


In 2018, the Italian billionaire Leonardo del Vecchio He returned to the city where he was born and was offered to invest 500 million euros in the country’s main cancer hospital.

The refusal of the Instituto Europa d’Oncology in Milan to accept the funds set the stage for a battle now taking place in two of Italy’s most important financial institutions: Mediobanca, a long-standing powerful stockbroker in the country’s corporate sector; and Generali, Italy’s largest insurance company.

Del Vecchio, founder and president of the world’s largest eyeglasses company Luxottica, took the refusal as a personal insult and blamed the hospital’s biggest backer, investment bank Mediobanca. This led to tensions between del Vecchio and the bank’s chief executive, Alberto Nagel, according to several people familiar with the relationship.

The feud between Del Vecchio and Nagel is due to aborted investment. “This is where all these tensions started,” said a prominent Italian businessman who knows both things well.

Del Vecchio, a major investor in both Generali and Mediobanca, owns, a challenge Mediobanca relied on its 13 percent stake in Generali to generate profits. Meanwhile, he and other Generali shareholders are engaged in a tug of war with Mediobanca over the group’s future and its management under CEO Philip Dunnett.

A key ally in Del Vecchio’s campaign against Generali’s management team is Francesco Gaetano Caltagirone, the 78-year-old businessman who is Generali’s vice president and is 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 ahead of Generali’s annual meeting next April. The group collectively owns 14 percent of its shares.

Andrew Ritchie, chief analyst at the independent research group, said that Generali’s strategy day next month, when investors hear about its three-year plan, will be a “watershed moment” in the shareholder battle.

He expects “more of the same” from Generali, focusing on earnings growth and investor returns, adding: “It will require a response from angry shareholders to say what they can do better.”

This struggle for control involving two of Italy’s leading finance houses and a pair of elderly billionaires highlights the intertwined personal rivalries and contributions that dominate the country’s financial sector. “This is not a battle for power, this is a battle for efficiency,” said a spokesperson for Caltagirone, which has increased its stake in Generali from 1 to 8 percent in the past 12 years.

Del Vecchio’s role as a strong player in the industry came relatively late in his career. Soon after his donation to a cancer hospital in Milan was rejected, he surprised the Italian financial world when he announced a 7 percent stake in Mediobanca. He now owns just under 20 per cent, the maximum allowed under an agreement he reached with the European Central Bank.

He has used his position as Mediobanca’s largest investor to push for governance reforms and also pressured Nagel to reduce the bank’s reliance on profits he receives from Generali, where he is the largest shareholder, and from Compass Banca, a consumer credit company.

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

“For the first time, Nagel was really pressured to do something,” said a close ally of Del Vecchio. “People think this is the last showdown – 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 the dividends it receives from the Generali © Miguel Medina / AFP / Getty Images

Under the agreement between Del Vecchio and Caltagirone, the couple agreed to consult with each other on how to achieve “more profitable and efficient management” of the insurance company.

Banking firm Fondazione CRT has also signed the agreement, and Del Vecchio and Caltagirone hope the powerful Benetton family, which owns 4 percent of Generali’s shares, will join.

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

To complicate matters further, Italian MPs recently proposed a legal reform that would, in effect, put a six-year limit on the tenure of chief executives and board members at the company. This will affect Donnet and Gabriele Galateri di Genola, president of the Generali since 2011, and may be important to Nagel in the future.

Generali’s technology approach and merger and acquisition strategy are two points of contention between the insurer’s management team and the alliance of aggrieved shareholders. A person close to Delfin, holding company Del Vecchio, described Generali as a “fintech laggard” and said its last decade was “a mixed bag of small-scale flagging and doubling in traditional Italy, where it already dominates”.

Critics see Generali’s recent acquisition of troubled domestic rival Cattolica as the type of deal that is better for the Italian economy than Generali’s shareholders. People close to Caltagirone said the Cattolica deal was “too late”. Generali has fallen behind its peers in terms of market capitalization over the past two decades.

Market cap (€ billion) bar chart showing that Generali has lagged behind its peers in market capitalization

“Generally need to find a way to grow organically or [through M&A] Which keeps it on a par with the likes of Zurich, AXA and Allianz, who all took the lead on the Generali if you look back in the early 2000s,” said one major contributor.

But proponents point out that Generali’s shares have generally done better than competitors since Donnet’s last strategic plan was launched three years ago. Generali’s stock is up about 24 percent since then, compared to 5 percent in Allianz, 15 percent in Axa, and 25 percent in Zurich.

Another criticism leveled at the Generali is that Mediobanca, its largest shareholder, has a significant impact on the insurance company. Generali’s longtime president, Di Genola, was president of Mediobanca until 2007.

Generali declined to comment for this article. But someone familiar with her view said that the account of Mediobanca’s influence on the Generali was “old”.

“If you look at the business decisions that Generali has made — mergers and acquisitions, strategy, you name it — it is impossible to see where something has been done for one particular shareholder rather than all of the shareholders,” said this person.

Del Vecchio and Mediobanca also declined to comment.

Line chart of stock prices (reestablished at 100) showing European insurance companies

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

Another person close to Generali’s management accused Del Vecchio of “strategic childhood”, adding: “He wants Generali to become the largest insurance company in Europe, if not in the world, but how to implement this is not clear.”

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

“A lot of money is at stake, but also as they reach the end of their lives, their reputation, legacy and pride are on the line. It is very difficult to find a middle ground with them.”

Additional reporting by Stephen Morris in London



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