Romain Zaleski: The Frenchman Who Is Shaking Up Italy Inc.

His play for Montedison challenges the old guard

French-born financier Romain Zaleski never lacked pluck. During World War II, when his family was trapped in Warsaw following a visit to relatives, an 11-year-old Zaleski delivered strategic papers to Polish resistance leaders, carrying out the hushed instructions of his mother as she was arrested before his eyes by the Gestapo in 1944. Divided and surviving epic adversity, the family was reunited after the war in Paris. Half a century later, Zaleski is on the front lines in a different kind of battle. By challenging Milanese merchant bank Mediobanca for control over $12.2 billion conglomerate Montedison, Zaleski has become a catalyst in what many believe is the final unraveling of old-style Italian capitalism.

Zaleski's coup: He moved on Montedison last fall, building up a stake equal to Mediobanca's 15% just as Mediobanca's control over other Montedison shareholders collapsed in February. In recent weeks, Zaleski got flank support from a $30 billion Goliath, Electricite de France (EDF). The state-owned ex-monopoly stunned Italians on May 22 when it revealed a 20% stake in Montedison--5% of which it acquired from Zaleski.

PRIZE ASSET. Raiders and hostile bids are now common in some European markets. But much of Italy's corporate landscape has remained protected until recently by a web of complex cross-shareholdings controlled by Mediobanca and its allies. Since the death of omnipotent Chairman Enrico Cuccia last June, however, Mediobanca itself has become the object of a struggle among its once pliant shareholders. Italian banks with industrial holdings, such as IntesaBCI, Sanpaolo-IMI, and Banca di Roma that once did Cuccia's bidding are pushing to break up Montedison and focus it on the energy business.

Indeed, some surmise Zaleski teamed up in advance with Mediobanca adversaries including EDF and agreed to spearhead the battle for control of Montedison. Its prize asset is a majority stake in Edison, Italy's No. 2 gas and electric utility, which is well-placed to challenge ex-monopoly Enel. "This is a story about how to break into a country successfully by doing it under cover," says Luca Arnaboldi, managing partner of Milan-based law firm Carnelutti. Zaleski insists he acted alone and his motivation for investing in Montedison last fall was to profit on an undervalued stock. "Montedison is a jewel with enormous future potential," says Zaleski, who came to Italy 17 years ago when he was recruited to be the CEO of Breno-based steelmaker Carlo Tassara.

An outsider to Italy's salotto buono, the elite clutch of industrial, financial, and political power brokers that have controlled Italian industry since the war, Zaleski, 68, is more entrepreneur than raider. An engineer with advanced degrees from the elite French schools Ecole Polytechnique and Ecole des Mines, he began his career working for the French state, rising up to special adviser to the Industry Minister. He later moved to the private sector, working as a turnaround specialist and then managing director for Paris-based conglomerate Revillon. But his biggest achievement was turning around a near-bankrupt Carlo Tassara in the 1980s, for which he received a 25% stake. Zaleski, a skilled entrepreneur who favors long-term strategic plays to short-term trading, bought a majority position from the Tassara family in 1989.

Zaleski made his first assault on Italy's Mediobanca-centered establishment in 1996, when he snapped up a 38.5% stake in Milan-based conglomerate Gruppo Falck. With shares trading at a mere $1.36 per share, Zaleski figured Falck's breakup value was higher than its market capitalization. He cashed out last fall at a 300% gain when Mediobanca organized a bid by Montedison for Falck.

Now, however, Zaleski is sitting back to watch the drama unfold. With EDF's arrival, the power struggle for control of Montedison has been transformed into a test case challenging the politics of European energy liberalization. Alarmed at the raid by France's state-owned EDF, the Italian government retaliated last week with a temporary decree freezing EDF's voting rights at 2%. "Now I have to wait. I launched the game, but it has gone way beyond me," says Zaleski, who made a $50 million profit when he sold a third of his Montedison shares to EDF. Whether or not EDF wins the battle for Montedison, Zaleski's maverick move already has shaken up Italy Inc.

By Gail Edmondson in Berlin

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