June 19, 2020 / 9:03 AM / 23 days ago

Breakingviews - Ray-Ban mogul’s late financial quest is baffling

MILAN (Reuters Breakingviews) - Leonardo Del Vecchio’s late swoop on a key nexus of Italian finance is adding a thrilling chapter to his long career. After becoming the largest investor in Mediobanca last year, the restless 85-year-old Ray-Ban mogul now wants to double his 10% shareholding. That could unlock the door to controlling 22 billion euro insurer Assicurazioni Generali. Yet Del Vecchio’s goals remain a riddle.

Sunglasses from Ray-Ban are on display at a optician shop in Hanau near Frankfurt, Germany, March 18, 2016.

At pandemic-depressed share prices, buying an extra 10% of Mediobanca would cost Italy’s second-richest man about 640 million euros, on top of the estimated nearly 900 million euros he has already tied up in Italy’s best-known investment bank. The outlay is manageable given his net worth, which Forbes puts at 18 billion euros. His successful track record should also secure the European Central Bank’s blessing to buy more shares.

The prospect is unsettling for long-serving Mediobanca boss Alberto Nagel, who has earned the respect of investors by diversifying the bank’s business and doubling its revenue. Del Vecchio criticised Nagel’s strategy last October, saying that Mediobanca’s bottom line was still too dependent on dividend income from Generali. Personal relations are strained: the two executives fell out over a 2018 plan to fund a Milan hospital research project. A 20% shareholding in Mediobanca would allow Del Vecchio to propose his own slate of board nominees or block decisions at extraordinary shareholder meetings.

The tycoon has signalled that he doesn’t plan to initiate any board changes. However, it’s hard to envisage the self-made man with a passion for dealmaking remaining a mere spectator. Del Vecchio, who spent part of his childhood in a Milan orphanage, built his empire through dozens of bold purchases, including those of eyewear network LensCrafters and sunglasses maker Oakley. “He has always strived for big buys,” says a senior Italian executive.

It’s two years since Del Vecchio merged Luxottica with Essilor, producer of Varilux lenses, to create a 51 billion euro giant. Shortly afterwards, the company launched a 7 billion euro bid for retailer GrandVision, which is now facing scrutiny from European regulators. The ascent has been turbulent: Del Vecchio parted company with several Italian CEOs. As executive chairman and 32% shareholder of EssilorLuxottica he openly clashed with the company’s French directors.

FINANCIAL AMBITIONS 

One explanation for Del Vecchio’s interest in Mediobanca is that he has spotted financial gains. He has suggested the firm should expand in investment banking and wealth management through acquisitions. But his main target is probably Generali. The intricacies of Italian capitalism mean a 1.5 billion euro investment in Mediobanca could give him effective control of the bank’s 13% shareholding in the insurer, which is worth about twice that amount. Throw in Del Vecchio’s own 5% stake in Generali and shares held by his ally Francesco Gaetano Caltagirone, and he would hold sway over 23% of the Trieste-based company.

People close to Del Vecchio say he would like Generali to expand in Europe, though its shrunken size could make it a target. The insurer’s market value has more than halved since 2008, when Del Vecchio first invested in the company, underperforming French rival Axa. Zurich, run by former Generali Chief Executive Mario Greco, is twice as big. Selling out to one of these rivals could offer good returns but would face resistance from the Italian government. Suitors may also balk at Generali’s 60 billion euro portfolio of Italian sovereign bonds.

An alternative is to sever the link between Mediobanca and Generali by pushing the former to offload its shares. One option is for the bank to swap its stake for another asset like Banca Generali, the 3 billion euro Italian wealth manager which is just over 50% owned by the insurer.

It’s possible that Del Vecchio’s objectives are less disruptive. He may simply be seeking to diversify his wealth away from the company that made his fortune. Influence over Mediobanca would also bring prestige to the self-made man who was long something of an outsider in corporate Italy.

For five decades, the investment bank played the role of power broker through a system of interlocking holdings fostered by founder Enrico Cuccia. Whoever sat inside its “salotto buono”, or “fancy parlour”, enjoyed outsized influence over local corporate dealings. Generali is all that remains of that network. Even so, a Mediobanca stake would be a key part of the corporate empire Del Vecchio would bequeath to his six children.

That prospect is one of the things that worries shareholders, because the mogul has yet to identify a clear successor. His 25-year-old son, Leonardo Maria, is the favourite but probably still too young to take the reins. Luxottica CEO Francesco Milleri, Del Vecchio’s trusted right-hand man, is little known to investors.

Even in the twilight of a long career, Del Vecchio still has big financial ambitions. But the lack of clarity over his long-term plans will keep investors in suspense.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below