Mediobanca’s capture by Banca Monte dei Paschi di Siena in a hostile takeover last year might have marked a symbolic end to Italy’s age of corporate skulduggery.
In fact, it merely meant Mediobanca had ceded its leading role.
Waves of astonishment pulsed out from Siena on Wednesday afternoon, when shareholders in the city’s Banca Monte dei Paschi voted to restore Luigi Lovaglio as chief executive, six weeks after he had been rudely dumped by his own board.
Having led a remarkable recovery for the laughing stock of Italian banking after its umpteenth bailout, and then amazed all last year by pulling off a hostile takeover of Mediobanca — the immaculately tailored Milanese adviser to every Italian industrial baron — Lovaglio was judged surplus to requirements.
His presentation of a business plan agreed by the whole board to investors on February 27 fell flat, seen as short on novelty or detail. Days later, when the board drew up its list of directors to be voted on at the AGM on April 15, Lovaglio’s name was missing.
Written off
When a shareholder with 1% of the stock presented an alternative slate of directors headed by Lovaglio, observers scoffed.
Lovaglio had an investigation by Milan prosecutors hanging over him, for alleged improper contact with Caltagirone and Delfin, the two billionaires’ family offices that everyone assumed had driven the Mediobanca takeover to get control of its 13% stake in Generali.
It was time for MPS to move on, everyone thought, and the next CEO would be one of three Italian corporate big hitters put forward by the board.
Some chance! “With MPS you can never be surprised — surprise is normality,” said one source.
Despite being supported by ISS and Glass Lewis, the proxy advisers and mouthpieces of corporate governance orthodoxy, the board’s list won fewer votes than the upstart slate headed by Lovaglio.
Caltagirone and Delfin, which like a pair of hunting dogs had brought down Mediobanca, were suddenly on opposite sides.
No one had expected them to vote together, because it would have looked too much like they were buddies — at a time when they are under investigation for acting in concert during the takeover.
But Delfin had been expected to abstain — instead it voted against Caltagirone, bringing back Lovaglio.
Reporting by the Financial Times and other news services has indicated that it was Caltagirone who forced out Lovaglio, fearing he was too willing to countenance letting go of the Generali stake. The European Central Bank intervened, writing twice to MPS in March to warn it to choose a chief executive most suited to the bank’s needs, not those of shareholders.
This may have helped push Delfin and some big international investors like BlackRock and Norges Bank to want Lovaglio back.
By urging his replacement with Fabrizio Palermo, who had little banking experience but plenty of ties to himself, the construction entrepreneur Francesco Gaetano Caltagirone seems to have overplayed his hand.
Next act begins
No longer a provincial clown, MPS is clearly now the leading actor in the divine comedy of Italian banking — the player who will trigger the plot twists.
The next scene takes place on Monday, when MPS’s new board — eight of them Lovaglio supporters, six from the MPS board’s slate and one other — vote to choose the company’s officers.
Lovaglio’s election as CEO is a foregone conclusion. The big question, observers say, is who is chosen as chairman. If it is Cesare Bisoni from the Lovaglio list, this could mean the board slides into civil war between the two camps.
The likely alternative is Corrado Passera, former CEO of Intesa Sanpaolo and one of Italy’s most respected corporate leaders. He was proposed by the MPS board, so choosing him could bring balance and a degree of peace. He may be trusted, too, to be independent from powerful shareholders.
But even though the action is unfolding in plain sight, the script is being written off stage. Driving all these manoeuvres are players — Caltagirone, Delfin, the government — who are clearly identified, but who keep their intentions quiet.
Even senior, well placed Italian bankers can only speculate as to their aims and next moves.
Asked what the government wanted, one banker said “Which government?”
Those close to deputy prime minister Matteo Salvini and the League party are rumoured to want to push a merger between MPS and Milan’s Banco BPM, while prime minister Giorgia Meloni’s Rome-based camp — aligned with Caltagirone — are less keen.
Building a third national champion bank for Italy is one of the prizes in this game — another is Mediobanca’s 13% stake in Generali, Italy’s largest insurer.
The government wants to guard that stake from foreign hands, and that means keeping it tightly held, rather than loose in the market.
The upset in Siena shows that Italian corporate life is as much about art and intrigue as ever. In this power contest, the aim is to control companies, without actually owning them or paying for them outright.
It goes against modern corporate governance theory. But when the government’s attitude is not to stop it, or even act as neutral referee, but to play itself, then this poker game looks set to go on till very late.