Mediobanca has ruled over Italian investment banking for decades. Rather than venturing beyond its national borders, it preferred to devote itself to tightening its hold on the salotto buono, as the Italian salon of big business became known.
These days, the salon has seen its influence wane, and so has Mediobanca’s central role in engineering domestic deals. Take the latest painful efforts of Pirelli, a long-standing member of this exclusive club, to extricate itself from its unhappy investment in Telecom Italia.
The tyre group has now finally managed to sell its controlling stake in the telecom company, but it was not Mediobanca that came up with the final solution.
Instead, it was the new boy of Italian investment banking – Gerardo Braggiotti of Banca Leonardo, a former Mediobanca and Lazard whizz-kid – who came up with the goods.
Pirelli’s Marco Tronchetti Provera had for some time become disillusioned with his telecoms investment, but his efforts to sell had been repeatedly frustrated by the Rome government, anxious to keep the group under Italian control. A deal with Rupert Murdoch was blocked. Then an initial approach from Spain’s Telefónica was rejected. More recently, AT&T and Mexico’s América Móvil frightened the daylights out of Rome by proposing to move into Telecom Italia.
Mediobanca, a Telecom Italia shareholder and part of the company’s shareholder pact, proposed a complex scheme to allow Pirelli to sell at the same time as ensuring Italian control. It apparently involved a partial spin-off of the Pirelli tyre business.
Mr Braggiotti’s one-year-old investment boutique came up with a much simpler plan allowing TI’s new controlling vehicle to have an Italian majority and a Spanish minority with Telefónica.
The deal could ultimately end up being very similar to the partnership Enel recently struck with Acciona to win control of Spain’s Endesa and outmanoeuvre Germany’s Eon.
Acciona will initially be in the driving seat at the joint venture controlling the Spanish power utility, but Enel is ultimately expected to gain the upper hand. The same is likely to happen at Telecom Italia, with Telefónica’s stake in the Italian company expected to grow over the next two to three years.
Mr Braggiotti has been steadily crashing in on Mediobanca’s traditional turf, but he has far more ambitious designs than simply taking on his old bank in Italy.
Indeed, he seems to be engaged in an entirely different project, using his European contact list and experience as a platform to move into other European countries rather than focusing on his domestic market.
He has already built a French presence through three recent acquisitions and is soon expected to expand in Spain and Germany.
After all, he is only reinventing and adapting the old S.G. Warburg model – part old-fashioned advisory banking, part wealth and asset management, and, given current trends, adding some private equity to the cocktail.
Iron Lady of French industry
The worst aspects of French employment are the large number of those under 24 and those over 50 who are out of work. If, as many expect, Anne Lauvergeon becomes the new finance minister should Nicolas Sarkozy win (also likely) the presidential elections, she will be one of those responsible for making it easier for the older generation to find jobs.
So it is something of a surprise that she should consider the age of Jacques Bacardats as one of the main reasons to replace him as chief executive of Eramet, the New Caledonian nickel producer and France’s last big mining group. After all, Mr Bacardats is only 60 and his track record has been good, at least judging from the sharp rise in Eramet’s share price under his leadership.
Eramet is controlled by the Duval family and the French state nuclear group Areva, of which Ms Lauvergeon is the head. The decision to put one of her younger cronies in Mr Bacardats’ place has raised eyebrows and enraged Thierry Breton, the outgoing finance minister, who has been engaged in a long-running feud with the so-called “Iron Lady” of French industry.
Relations between the two have steadily deteriorated since Mr Breton blocked Ms Lauvergeon’s efforts to launch a partial privatisation of her state-owned group. Tempers recently flared over the finance minister’s concerns that Areva was embarking on a reckless bidding battle against an Indian rival to secure a German wind-power engineering group. Mr Breton is fuming; he claims he was not properly informed about Mr Bacardats’ replacement and it is a fait accompli.
Even if age was the official excuse to justify the ousting, surely at 60 he was not too old to set out a long-term vision for his group. Look at Assicurazioni Generali. It has just reappointed its chairman, Frenchman Antoine Bernheim, for another three years. Mr Bernheim has been overseeing a push by the Italian insurer into new areas in central and eastern Europe. He is 82.
Spirit of the times
Chairmen and chief executives who rail against their company’s languishing share price risk sounding like husbands justifying an affair – I’m being taken for granted, the markets don’t understand me, and so on.
At least Sir Nigel Rudd, who has accused the sell-side analysts that cover Alliance Boots of being “stupid”, can cite hard facts in support of his claim that the drugs wholesale and pharmacy company was misunderstood.
As chairman, he last week agreed to sell the group to Stefano Pessina, its executive deputy chairman, and Kohlberg Kravis Roberts, the private equity firm, at a premium of more than 40 per cent to the price at which about half the analysts were recommending a sell.
Sir Nigel’s outburst captures the spirit of the times. Sell-side analysts and their bosses have been worrying how to justify the research department’s existence ever since Eliot Spitzer stopped investment banks using analysts as cheerleaders for house deals.
A wonderful internal e-mail from HSBC’s global head of equity research last year warned the bank’s analysts that their output was largely “worthless”, while Merrill Lynch’s head of research wrung her hands in March about the “Napsterisation” of sell-side opinions, which can be disseminated seconds after publication by web aggregators.
Analysts have tried to distinguish themselves by publishing bold predictions of deals that generally haven’t happened, or they have run with the pack – a safety-first tactic that is only occasionally exposed by a competitive bidding situation, as in the case of Alliance Boots.
In the same FT interview, Sir Nigel says institutional investors have “a lot of talent in-house” – adding to a widening myth that the buy-side are sharp-eyed geniuses and the sell-side are conflict-ridden dopes. But judged on the performance of Alliance Boots’ shares after last year’s merger between Mr Pessina’s Alliance Unichem and Boots, institutions were also guilty of undervaluing the group’s prospects. Either all outside analysts were wrong about the company – or Sir Nigel and Mr Pessina weren’t explaining it well enough. firstname.lastname@example.org