Breaking Up Not So Hard To Do

Michael Hedges July 4, 2013 Follow on Twitter

Love it or not, change happens. Media groups, large and otherwise, face this everyday with the roll and tumble of economics and consumer behavior. Blink your eyes and a new platform pops up like a mushroom. Investors and shareholders stuck between boardroom and yacht are often the last to see it.

Shareholders in RCS Mediagroup, there are several, are poised to restructure the company following a needed capital infusion.  RCS Mediagroup publishes major daily newspaper Corriere della Sera and sports daily Gazzetta dello Sport among others. Fiat Group – more than just cars – is likely to emerge as the major, perhaps dominant, shareholder, a tad above 20%. Fiat Group controls another big Italian newspaper, La Stampa, fueling considerable speculation of an alliance or more.

When shareholders, their lawyers and bankers meet officially later this week (July 5) things may change. Fiat Group chairman John (Jaki) Elkann has pledged participation in the capital hike and seems to support current RCS CEO Pietro Scott Jovane. Diego Della Valle, CEO of luxury goods house Tod’s and also a major RCS shareholder, wants a few changes.

As Italians trod cautiously into the post-Berlusconi era its richest and most powerful are shuffling their riches and power. The “incestuous web of relationships that connect many of Italy’s lead firms,” noted The Economist (June 29), could unravel as “some bad old ways are being abandoned.” None of this will happen quickly, easily or without a fight.

“I’m waiting for some important stakeholders to confirm what we have, on many occasions, discussed and considered positively,” said Mr. Della Valle, quoted by Reuters (July 2). More specifically he wants to “give the company a better future in the publishing business, respecting employees and reinforcing editorial independence” Regarding Mr. Elkann, Mr. Della Valle said he had “no reason to meet him.” Mr. Della Valle holds a 8.7% stake in RCS and may or may not part with more cash, though he did say he’d “do my part.” Skeptical editorial staff at Corriere della Sera, quoted variously and anonymously, have referred to Mr. Della Valle as “the shoemaker” and Mr. Elkann as “the kid.”

RCS could be split into “two or three parts,” suggested La Repubblica (June 28), without getting specific.  Igniting that flame and suggestions that new foreign investors might have interest in RCS was Mr. Elkann joining the new News Corporation board after the publishing and entertainment businesses split last month. He denied any impending “alliance” with Rupert Murdoch, who is chairman of both the new News Corporation and 21st Century Fox. Pay TV operator Sky Italia, for which Mr. Murdoch fought tooth and nail with the Berlusconi family’s Mediaset, is on the 21st Century Fox organigram.

Mr. Della Valle seems to be on his own in this “rustic duel,” as described by one analyst. Minority shareholders Benetton and Assicurazioni Generali backed away. Investment bank Mediobanca and retail bank Intesa Sanpaolo seem to side with Mr. Elkann. Financier Giuseppe Rotelli, a 16.55% shareholder in RCS and leaning in the direction of Mr. Della Valle, passed away last week (June 28) after a long illness. 

“Now it’s time to make a clear decision, and for some of us it’s time to show whether we want this country to change, or whether we want to keep everything as it is and as it was in the past,” said Mr. Della Valle.

Speaking at the Italian Advertisers' Association (Utenti Pubblicità Associati -UPA) annual meeting, Mr. Jovane noted an advertising “slowdown in the second quarter of 2013 compared to the previous year,” reported Milano Finanza (July 3). “There have been positive signs for several months in online (advertising), where we are improving.” Digital revenues for RCS gained 11% to €34 million, about 12% of total revenues.

On the high tension among shareholders, he added, “We are always calm, just like before.”

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