Ray-Ban owner’s twilight ambition is baffling

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.

Leonardo Del Vecchio’s latest foray into a key nexus of Italian finance adds an exciting chapter to his long career. After becoming Mediobanca’s biggest investor in 2019, the restless 85-year-old magnate, owner of Ray-Ban, wants to double his 10% stake. That could open the door to control Generali, of 22,000 million euros. However, his goals remain an enigma.

In a time of pandemic depression, buying an additional 10% of Mediobanca would cost Italy’s second-richest man some 640 million, in addition to the nearly 900 million he has already invested in the country’s best-known investment bank. The disbursement is manageable given its net worth, which Forbes estimates at 18,000 million. Its successful track record should also guarantee the ECB’s blessing.

The prospect is haunting for veteran Mediobanca chief Alberto Nagel, who has earned the respect of investors by diversifying the bank’s business and doubling his income. Del Vecchio criticized Nagel’s strategy in October, saying Mediobanca’s bottom line was still too dependent on Generali’s dividends. Personal relationships are strained: the two quarrelled over a 2018 plan to fund a research project at a Milan hospital. A 20% stake in Mediobanca would allow Del Vecchio to propose his own list of candidates for the board or block decisions at extraordinary shareholders’ meetings.

The tycoon has indicated that he does not plan to initiate any changes to the council. But it’s hard to imagine that this self-made man with a passion for corporate operations is a mere spectator. Del Vecchio, who spent part of his childhood in a Milan orphanage, built his empire through dozens of bold purchases, including that of sunglasses maker Oakley. “He has always strived to make big purchases,” says a senior Italian executive.

Two years have passed since Del Vecchio merged Luxottica with Essilor, the producer of the Varilux lenses, to create a $ 51 billion giant. Soon after, the company launched a $ 7 billion offer for retailer GrandVision, which faces scrutiny from European regulators. As CEO and 32% shareholder of EssilorLuxottica, Del Vecchio openly clashed with the company’s French directors.

One explanation for Del Vecchio’s interest in Mediobanca is that he has identified financial gains. He has suggested that the company should expand into investment banking and wealth management through acquisitions. But his main objective is probably Generali. The complexities of Italian capitalism mean that a 1.5 billion investment in Mediobanca could give it effective control of 13% of the bank’s stake in the insurer, which is worth roughly double that amount. Adding 5% of Generali that Del Vecchio owns and the shares of his ally Francesco Gaetano Caltagirone, he could control 23%.

People close to Del Vecchio say he would like Generali to expand across Europe, although its small size could make it a target. The insurer’s market value has decreased more than half since 2008, when Del Vecchio first invested in the company, with a return lower than that of France’s Axa. Zurich, led by ex-CEO of Generali Mario Greco, is twice as big. Selling one of these rivals could offer good returns, but it would face resistance from the Italian government. The suitors could also resist Generali’s portfolio of € 60 billion in Italian sovereign bonds.

An alternative is to break the bond between Mediobanca and Generali by pushing the former to release their shares. One option is for the bank to exchange its stake for another asset such as Banca Generali, the € 3 billion Italian wealth manager that is somewhat more than 50% owned by the insurer.

Del Vecchio’s goals may be less disruptive. You may simply seek to diversify your wealth away from the company with which you made your fortune. The influence on Mediobanca would also give prestige to the man-made himself and who for a long time was a stranger incorporate Italy.

For five decades, the investment bank played the role of broker through a system of interlocking participations promoted by founder Enrico Cuccia. Whoever sat inside his “salotto Buono,” or luxury lounge, enjoyed an inordinate influence on local corporate operations. Generali is all that remains of that network. Still, a stake in Mediobanca would be a key part of the corporate empire that Del Vecchio would bequeath to his six children.

That prospect is one of the things shareholders are concerned about because the magnate has yet to identify a clear successor. Her 25-year-old son Leonardo Maria is the favourite, but he’s probably still too young to take charge. Luxottica CEO Francesco Milleri, Del Vecchio’s trusted right-hand man, is poorly understood by investors.

Even in the twilight of a long career, the entrepreneur still has great financial ambitions. But a lack of clarity about its long-term plans will keep investors on hold.