A rebel Generali investor could take legal action if his bid to appoint new top executives at Italy’s biggest insurer narrowly loses in a shareholder vote this month, a presidential candidate has said.
In an interview with Reuters, former Goldman Sachs banker Claudio Costamagna said Generali investor Francesco Gaetano Caltagirone could challenge a victory for the opposing side at the April 29 AGM called to elect a new Generali board of directors if the margin is less than 6%.
The fight for control of Europe’s third-largest insurer not only threatens the stability of the Italian giant – which, as the country’s main holder of public debt, is considered a cornerstone of the financial system – but challenges the reappointment of the CEO Philippe Donnet, proposed by Generali’s board of directors for a third term.
It also highlights the legacy of cross-shareholdings that for decades dominated the country’s “salotto buono” – the beautiful salon – a system based on the influence and connections between Italy’s biggest companies.
Costamagna – who has been proposed by Caltagirone as the insurer’s new chairman – said the Italian tycoon’s camp had “hope” to win the vote of the Italian Benetton family, which owns around 4% of Generali and has no not yet taken sides in the dispute between the construction magnate against the board of directors of Generali and its main investor Mediobanca MBDI.MI.
The Benetton family could not be reached for comment.
With a stake of more than 9%, Caltagirone is the second largest investor in Generali, behind Mediobanca which holds just under 13%.
To counter the weight of Caltagirone and that of fellow Italian billionaire Leonardo Del Vecchio, who is Generali’s 3rd largest investor with a stake of around 8%, Mediobanca borrowed shares from Generali to give it 17.2% of the vote at the GA.
Mediobanca can also count on the vote of Italian group De Agostini, which only plans to sell its 1.4% stake in Generali after the AGM and has expressed its appreciation for Donnet.
Costamagna said Caltagirone would contest a win which would only reflect borrowed shares from Mediobanca and De Agostini’s participation.
“They borrowed around 4.5% and… De Agostini’s stake is already sold… which means the day after the AGM they have 6% less,” Costamagna said.
“If they win with a margin of less than 6%, they will no longer be legit,” he added.
Caltagirone and Generali declined to comment.
The International Securities Lending Association (ISLA) advises against using borrowed stock to vote at shareholder meetings.
A source familiar with the matter told Reuters that ISLA, which in 2018 said it “has never condoned the practice of borrowing securities for the sole purpose of voting”, had written to Mediobanca in this regard. .
Mediobanca said in an emailed comment that ISLA, whose rules are not binding, reiterated the provisions of the UK money market code.
“The share loan in question is a market operation aimed at protecting an investment of almost 4 billion euros where the interest of Mediobanca coincides with that of the other shareholders of Generali,” Mediobanca said.
Union Investment, also a shareholder in Generali, told Reuters on Thursday it backed the existing management.
“Cherry on the cake”
Costamagna said acquisitions in key areas, including asset management, would play a role in driving Generali’s growth, but negotiation would not be the main priority.
“We have the money to do it, but it’s the icing on the cake and we have to find the icing and the cake has to be ready,” he said.
“If there is the right target, who can give us what we are missing and can really complement our business, I have no problem going ahead and trying to do that,” he said. added.
The challenger plan forecasts growth in earnings per share, including from acquisitions, of more than 14% over the period 2021-2024, compared to a target of 6-8% under Donnet’s current strategy.
Critics say Caltagirone’s estimated earnings are too ambitious without major acquisitions.
However, Costamagna said the main focus was on technology, cutting costs and overhauling Generali’s holding structure while maintaining dividend payments as retail investors – including wealthy families – had expressed concern about possible reductions in payments.
“We overemphasized the M&A side a little bit…and people thought they were going to take over the world,” he said.
Still, he said asset management deals would be pursued, despite lofty valuations.
“We are very cautious, 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 Milan; Editing by Stephen Jewkes, Kirsten Donovan and Matthew Lewis)
Generali Life Assurance (Thailand) Plc.