By Carolyn Cohn, Pamela Barbaglia and Valentina Za
LONDON (Reuters) -A rebel investor in Generali could mount a legal challenge if his bid to appoint new top executives at Italy’s largest insurer loses by a narrow margin in a shareholder vote this month, a candidate for the chairman’s role said.
In an interview with Reuters, former Goldman Sachs banker Claudio Costamagna said Generali investor Francesco Gaetano Caltagirone could challenge in court a victory by the opposite side at the April 29 AGM called to elect a new Generali board if the margin is less than 6%.
The tussle for control of Europe’s third-largest insurer not only threatens the stability of the Italian giant – which as a major holder of the country’s government debt is considered a cornerstone of the financial system – but calls into question the reappointment of CEO Philippe Donnet, who was put forward by Generali’s board for a third mandate.
It also shines a spotlight on the legacy of cross shareholdings that for decades has dominated the country’s “salotto buono” – the fine drawing room – a system based on influence and connections interlocking Italy’s biggest companies.
Costamagna – who has been proposed by Caltagirone as the insurer’s new chairman – said the Italian tycoon’s camp was “hopeful” of securing the vote of Italy’s Benetton family, which owns around 4% of Generali and is yet to take sides in the feud pitting the construction magnate against Generali’s board and its main investor Mediobanca.
The Benetton family could not be reached for comment.
With a stake of more than 9%, Caltagirone is the second-biggest investor in Generali, behind Mediobanca which owns just under 13%.
To counter Caltagirone’s weight and that of fellow Italian billionaire Leonardo Del Vecchio, who is Generali’s No. 3 investor with a stake of around 8%, Mediobanca has borrowed shares in Generali to give it a 17.2% voting stake at the AGM.
Mediobanca can also count on the vote of Italy’s De Agostini group, which plans to sell its 1.4% stake in Generali only after the AGM and has expressed appreciation for Donnet.
Costamagna said Caltagirone would challenge a victory that reflected merely Mediobanca’s borrowed shares and the De Agostini stake.
“They have about 4.5% borrowed and … the De Agostini stake is already sold … which means the day after the AGM they have 6% less,” Costamagna said.
“If they win by a margin of less than 6%, they’re not going to be legitimate anymore,” he added.
Caltagirone and Generali declined to comment.
The International Securities Lending Association (ISLA) advises against using borrowed shares to vote at shareholder meetings.
A source close to the matter told Reuters that ISLA, which in 2018 said that it “has never condoned the practise of borrowing securities for the sole purpose of voting,” had written to Mediobanca in this respect.
Mediobanca said in an emailed comment that ISLA, whose rules are not binding, was reiterating provisions in the UK’s money market code.
“The share lending in question is a market transaction aimed at protecting an investment worth nearly 4 billion euros where the interest of Mediobanca coincides with that of other Generali shareholders,” Mediobanca said.
Union Investment, also a Generali shareholder, told Reuters on Thursday it supported existing management.
‘CHERRY ON THE CAKE’
Costamagna said acquisitions in key areas including asset management would play a role in boosting Generali’s growth, but dealmaking wouldn’t be the main priority.
“We have the cash to do it, but it’s the cherry on the cake and we have to find the cherry and the cake has to be ready,” he said.
“If there is the right target, which can bring us what we’re lacking and can really complement our business, I have no problem in going ahead and trying to do it,” he added.
The challenger plan forecasts earnings per share growth, including from acquisitions, of more than 14% over the 2021-2024 period, compared with a 6-8% target under Donnet’s current strategy.
Detractors say Caltagirone’s estimated earnings are too ambitious without sizable acquisitions.
However, Costamagna said the focus was mainly on technology, cost cutting and overhauling Generali’s holding structure while keeping dividend payments as retail investors – including wealthy families – had expressed concern over possible cuts to payouts.
“We stressed the M&A side a bit too much… and people thought they’re going to acquire the world,” he said.
Yet, he said asset management deals would be pursued, despite hefty valuations.
“We are very careful, but you know, Bernard Arnault at LVMH has created one of the best companies in Europe and has always overpaid for all his targets, always.”
(Reporting by Carolyn Cohn and Pamela Barbaglia in London and Valentina Za in MilanEditing by Stephen Jewkes, Kirsten Donovan and Matthew Lewis)
