New investor Del Vecchio challenges Mediobanca's strategy

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By Claudia Cristoferi and Gianluca Semeraro

MILAN (Reuters) – Eyewear tycoon Leonardo Del Vecchio on Wednesday urged Mediobanca to build up its investment banking business in a challenge to venerable merchant bank’s strategy, nearly a month after he snapped up a 7% stake that stunned corporate Italy.

Del Vecchio said a new business plan due in November should rely less on contributions from its consumer credit business and from its most prized asset – insurer Generali (MI:).

“I expect a new business plan that … builds a future as an investment bank, able to play a leading role in Italy and Europe,” said Del Vecchio, the executive chairman of Ray-Ban maker EssilorLuxottica (PA:).

Three sources close to the matter said Del Vecchio aims, by building a stake in Mediobanca and putting pressure on its management, to have more control over the future of Generali, including through possible cross-border deals.

Mediobanca effectively controls Generali, Europe’s third largest insurer, with a 13% stake. Del Vecchio owns 4.9% of Generali, often seen as a potential target for foreign rivals.

Mediobanca, which Chief Executive Alberto Nagel has led since 2008, is an outperformer in Italy’s sluggish financial industry and in its last fiscal year booked its strongest ever revenues.

Its wealth management and consumer businesses accounted for 60% of revenues in the year to end-June, compared with 25% for investment banking.

But a person familiar with Del Vecchio’s thinking said he believes the bank could be managed better, noting that Generali accounts for about 30% of operating profit.

The person said Del Vecchio wanted to change Mediobanca’s governance rules to ensure he will have a say in the choice of the next chief executive when Nagel’s mandate comes up for renewal next year.

The bank’s bylaws currently state that the CEO must be picked from among managers who have been with the bank for at least three years, effectively excluding outsiders.

To change the criteria, Del Vecchio would need the backing of two-thirds of shareholders. So far, Mediobanca’s other top investors have not taken sides and most analysts have praised Nagel’s tenure.

“Mediobanca’s CEO has steered the company in the transformation of recent years … with better profitability than the system average, higher revenue growth, lower risk profile versus peers and solid capital,” Citi analysts said.

“Never change a winning horse.”

Del Vecchio also blames Nagel, and Generali’s CEO, Philippe Donnet, for what he sees as Generali’s poor share price performance compared to rivals like Allianz (DE:) or Axa (PA:), the sources said.

While he would favor a tie-up with a foreign group, he wants to ensure Generali’s Italian identity is preserved.

Del Vecchio’s bold move on Mediobanca has echoes of the corporate intrigue in the so-called salotto buono, or fine drawing room, the informal club that has pulled the strings in corporate Italy since 1945 and had Mediobanca at its center.

Though its influence has diminished in the wake of the global financial crisis, Mediobanca still plays a powerful role in Italian corporate life.

One source said Del Vecchio informed Nagel of his 580 million euro ($637 million) investment just hours before issuing a statement on Sept. 17.

“Del Vecchio is unpredictable, no one knows what he’s up to,” said a banker who has worked with him. “It’s like walking in the dark,” said another person close to the situation.

Del Vecchio, who grew up in an orphanage and went on to become Italy’s second richest person, has worked closely with Nagel for years.

Mediobanca advised Del Vecchio when Luxottica merged with French lens maker Essilor in 2018 to create EssilorLuxottica, the world’s biggest eye-wear manufacturer.

But the relationship between Del Vecchio and Nagel has soured in recent months, the sources said, after Mediobanca helped to block an investment the tycoon wanted to make in a Milanese hospital.