H-Farm case for Cattolica?
The article by Emanuela Rossi
There are many findings made by the Insurance Supervisory Institute to the Cattolica group thanks to the inspection born after the showdown at the end of 2019 between the president Paolo Bedoni and the then CEO Alberto Minali. Among the reports, the most significant concern the decisions of the board of directors on some investments – especially on H-Farm, as reported by Radiocor – which would reveal a lack of autonomy of the board compared to the dominus Bedoni who has chaired the Veronese group since 2006 and who sits in the board of directors since 1999. For this reason the Authority would have come to ask for a profound replacement of the board of directors.
WHAT IS H-FARM
H-Farm is a company founded in 2005 to lead the digital transformation of companies and produce culture through new educational and business models. As reported on the website www.h-farm.com, the group was the first in the world to adopt a model that combines investments, business consultancy and digitally enhanced training programs in one place and today it is "the largest center of innovation in Europe ". H-farm, led by the CEO Riccardo Donadon and the general manager Luca Valerio, currently has 38 investments in its portfolio, “startups that are mostly structured and international in scope”.
The investment area follows two main lines of activity: "Portfolio Management", focused on constant support to startups in monitoring KPIs and investor relations activities, and "Portfolio Development", to support extraordinary operations on capital, research and in the analysis of strategic partnerships and M&A. In the meantime, H-Farm continues to be present on the startup investment market thanks to the collaboration with InReach Ventures, a London-based Venture Capital fund. The capital increase operation, which began on October 28, ended last December with the aim of finding resources for the implementation of the 2020-2024 Business Plan. In total, 20 million euros were raised which will be used to bring the Education business unit into operation, also through the development of remote teaching technologies, and for the growth of Innovation projects to support the digitalization of companies.
THE H-FARM CAMPUS AND THE SUPPORT OF CATTOLICA ASSICURAZIONI
The relations between Cattolica Assicurazioni and H-Farm culminated, as mentioned, in the expansion works at Ca 'Tron (TV) of the company 's campus , owned by the Veronese group, capable of hosting up to 3,000 people including students, researchers and entrepreneurs. The transaction was made possible thanks to the establishment, in 2017, of a closed, non-speculative real estate fund managed by Finint Investments SGR, with assets of over € 101 million subscribed by Cattolica Assicurazioni, which holds the majority stake in the Fund ( 56% of the assets), Cdp Investimenti Sgr, with the Fia 2 fund, for 40%, and Ca 'Tron Real Estate, the company of the founders of H-Farm, for the remaining 4%.
"Cattolica felt the duty to contribute to creating a cultural and educational opportunity for the development of the territory, taking advantage of an enviable geographical position and proudly supporting a project that will distinguish our Region in the years to come" he declared at the laying ceremony of the first stone of the Bedoni shipyard, according to which this operation represented "a new growth model that combines tradition and innovation, land and culture, environment and technology, components that we are already enhancing in our agricultural property in Ca 'Tron with the objectives of recovery, rehabilitation and sustainable agri-food development ".
THE INSPECTION OF IVASS AND THE REQUESTS TO GOVERNANCE
Il Sole 24 Ore recalls that the IVASS report reached the end of the inspection which started at the end of 2019, after the final battle between Bedoni and the former CEO of Minali, from whom a board called urgently removed the powers on 31 October of the same year. Minali then resigned from the board last May, however, filing a lawsuit against Cattolica for damages while the former CEO and general manager Carlo Ferraresi has been in his place since August 2020. In the document, the Confindustria newspaper informs, the Supervisory Authority also asked for a strong discontinuity in governance to be implemented starting from the backward step of the board with the exception of the recent ones appointed by Generali after its entry into the capital with a stake of 24.4% .
Behind such an instance, explains Il Sole , "a point already pointed out in the report produced by Consob last summer, which in turn would be in the records of the Verona Public Prosecutor" or the issue of the management of meetings, "with reference between other things to the dynamics of the collection of voting proxies ". It should be remembered that the Veronese group is the only one to operate according to a cooperative form – for which each shareholder has the right to one vote regardless of the share of capital they own – and will do so until next April when it will definitively become a joint-stock company. The Prosecutor of Verona, underlines the economic newspaper, has moved "on the basis of an investigation which has as a crime hypothesis the illegal influence on the assembly" and which intends to verify "the possible existence of mechanisms aimed at orienting or building the shareholders' vote ".
Other findings noted by IVASS concern the dynamics of the board of directors "often 'acquiescent' with respect to the proposals of President Bedoni" and which would have led, for example, to an incorrect "examination of the proposals on the basis of a correct relationship between risks and returns" of investments including that in H-Farm.
In this regard, according to the Insurance Supervisory Authority, Cattolica would not have carefully managed and assessed the risk elements that emerged from the investment in H-Farm, of which the group chaired by Bedoni held only 4.5% (diluted to 3.78 % after the recent recapitalization) but which from 2013 to date – according to Ivass – would have recorded losses on the value of the investments linked to H-Farm of approximately 25 million. Therefore, in addition to the direct share, the reference is to the equity instrument issued by H Farm in December 2019, in which Cattolica invested 7 million as a grant, and to H-Campus, a mutual investment fund of which the company has 60 %, which owns the maxi campus near Ca 'Tron, the large agricultural estate also controlled by Cattolica. This is a fund that should have been fed with rents but the H-Farm crisis and the pandemic “penalized its departure and consequently the income statement”. At the moment H-Campus has started its own business (it was inaugurated in September 2020) while H-Farm has shifted its focus on higher education. Among the findings that led to the request for the board's resignation, therefore, also the various operations on the start-up incubator.
Now the insurance group has sixty days to send its solutions to Ivass but, according to the business newspaper, it will do so within a month and will send an external consultant to list the new board members who will be examined by the assembly in April, called to approve the financial statements.
H-FARM AND THE BEDONI-MINALI CLASH
According to a background from the Morning of December 2019, the H-Farm issue was also one of the battlegrounds between Bedoni and the former ad Minali, who "asked to push for the renovation of an object that has had poor results for too long time". At the time, the president proposed a capital increase of around 20 million euros, which was then converted into the "possible issue of equity instruments up to a maximum of 8 million euros".
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/caso-h-farm-per-cattolica/ on Sun, 17 Jan 2021 14:43:45 +0000.