Activist investors lead ‘quiet revolution’ in Italy
Corporate governance is improving as the grip of traditional company owners weakens
Italy has emerged as a new battle ground for activist investors. They have been spurred on by improving corporate governance and the weakening of traditional company owners during Europe’s sovereign debt crisis.
Twelve Italian companies were on the receiving end of activist intervention — defined as a shareholder publicly agitating for an economic or governance-related change — last year, compared with four in 2013, according to figures from Activist Insight, a data provider.
The uptick in shareholder activism in the eurozone’s third-largest economy comes on the back of a comprehensive dismantling of company cross-shareholdings, which have previously made Italian businesses impenetrable to outsiders.
This followed Europe’s sovereign debt crisis that started to gather pace in 2010, which loosened the grip of the Italian government and powerful family owners on many of the country’s largest businesses.
Italian companies that came under pressure from activists last year include Parmalat, the dairy group, and Mediaset, the media business. Elliott Management, the prominent US activist fund, is also embroiled in a battle with Hitachi, the Japanese conglomerate, over its proposed takeover of Ansaldo STS, an Italian rail signalling equipment company.
Joseph Oughourlian, founder of Amber Capital, the UK hedge fund involved in activist campaigns at Parmalat and Mediaset, said a number of rights issues by Italian companies over the past decade have further weakened the hold of traditional shareholders, enabling activists to enter the fray.
He said a “quiet revolution” has taken place in southern Europe, moving the region away from its reputation as “a world of controlled capitalism”. “There will be increasing voting from foreign shareholders. During [the] crisis of 2012, there weren’t any Anglo-Saxon shareholders. They are now coming back.”
Amber Capital, which has a stake of around 4 per cent in Italian-listed Parmalat, recently led a successful push by minority shareholders against its majority owner, Lactalis, the French company that had wanted to take the dairy producer private.
Amber also has a 3 per cent stake in Mediaset and is pushing the group to resolve a legal tussle with Vivendi, the French conglomerate. The disagreement began when the latter pulled out of a deal to buy Mediaset Premium, a TV service.
However, Nicholas Brooks, head of economic research at Intermediate Capital Group, the UK-listed asset manager, said there is still some degree of political risk in Italy.
The country posted better than expected growth in the first quarter, but overall expansion remains sluggish as it grapples with high levels of debt and unemployment.
Italy’s Five Star Movement, an anti-establishment political party set up in 2009, has also caused international investors concern by indicating it could hold a referendum on euro membership should it triumph in the country’s next election.
“Political risk in Italy has gone quiet for now, but with an election due before May next year and Eurosceptic parties in the ascendance, this is a risk that will probably return,” he said.