All the contradictions of Del Vecchio and Caltagirone on Mediobanca and Generali

All the contradictions of Del Vecchio and Caltagirone on Mediobanca and Generali

Moves and objectives (often hidden) of Leonardo Del Vecchio and Francesco Gaetano Caltagirone between Mediobanca and Generali according to the economist Alessandro Penati, columnist for the newspaper Domani directed by Stefano Feltri

The entry of Leonardo Del Vecchio (LDV) in Mediobanca had received great media attention: what is behind it? Will he replace the CEO (later reconfirmed)? Which list will you vote for the board of directors? Mediobanca is also the first shareholder of Generali of which LDV, together with Caltagirone, is a significant shareholder. So one year after the renewal of the board of Generali, the fuss has already started: will he replace the CEO? Is there an agreement with Caltagirone, who has just joined Mediobanca? Who will make the list of the new council? What role will the CEO of Mediobanca play?

When it comes to finance, it seems that Italians are only interested in power games, armchairs, and the background.

Everything is presented from a personal point of view: the results, prospects and profitability of a company are of interest, while managers and entrepreneurs enjoy the same attention reserved for celebrities. Whether the capital is public or private makes little difference: the same attention accompanies the season of "appointments" in publicly owned companies.

Nothing wrong with that, but it is the representation of an endangered capitalism. Efficient capitalism should be anonymous and focus on the interests of investors, the market and the economy in general: what strategy does LDV have in mind for Mediobanca and Generali?

The declared objective of defending Italian character and the intent to bring the two companies back to the top of Europe sound anachronistic and vacuous: the same LDV, with a holding company in Luxembourg, has just moved the Luxottica headquarters to France , having merged with Essilor; and the corporate dimension , in itself, is not a goal, but is the result of profitability, investments, management efficiency, and winning strategies. Of this, nothing is known.


Let's take Mediobanca. It has gone through better than others the structural crisis that has hit the banking system since 2007: since then, in fact, it has earned 2.5 times more than the European sector index, 34 percent more than Intesa, while Unicredit, of which LDV is historic shareholder, lost 80 percent. A result obtained by diversifying the business and focusing on the flow of commissions. A valid strategy, but it implies that Mediobanca remains a medium-sized European regional bank. Does LDV want to change it and grow rapidly with mergers and acquisitions, perhaps in fintech which has higher multiples and growth? We would need capital that Mediobanca does not have, and LDV would have to dilute its share (which it would not like).

Diversification has led Mediobanca to become a financial conglomerate which, like everyone, is worth less than the sum of the assets held. Does LDV want to maximize the value of its investment by selling the various pieces separately?

Possible, but it doesn't fit his image as a patient investor. Distributing the Generali shares of Mediobanca to shareholders, as some have proposed, would not make sense because it would be equivalent to selling a significant shareholding without collecting the premium and LDV would end up with a share of the insurance that it could buy for less on the market.

In total silence about his real intentions, all that remains is to hypothesize that joining Mediobanca will help him increase his influence over Generali, adding the bank's share to that held directly. It has the flavor of old-fashioned relationship capitalism, in spite of good governance.


Same goes for Generali. In the five years of Donnet management, the stock on the stock market moved in line with the European sector index. However, the consensus estimates for 2021 forecast a return on capital of 9.2 per cent, lower than the average 10.5 of the major competitors (Allianz, Axa and Zurich). The lower profitability translates into a lower market value compared to equity: 0.9 times, compared to the 1.2 average of the major competitors.

Does LDV want to change management to increase profitability? It would be ironic given that Mario Greco was sent away to get Donnet, who went to Zurich, which is the most profitable insurance company among the big names. Or are you thinking of growth through acquisitions?

They don't always create value and then LDV should be diluted (I don't think it wants it). Here too, in the absence of indications, it is legitimate to assume that LDV (and Caltagirone) is attentive to the possible overlap of Generali's real estate interests with its own, which do not necessarily coincide with those of the investors.

(extract from an analysis by Penati on Domani; here the full version )

This is a machine translation from Italian language of a post published on Start Magazine at the URL on Mon, 15 Mar 2021 09:18:47 +0000.