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Parmalat’s Bondi Turns to Banks He Sued to Ward Off Lactalis

Parmalat SpA Chief Executive Officer Enrico Bondi
Parmalat SpA Chief Executive Officer Enrico Bondi. Photographer: Giuseppe Aresu/Bloomberg

Parmalat SpA Chief Executive Officer Enrico Bondi revived Italy’s biggest dairy company by reaping about 2 billion euros ($2.8 billion) from suing former creditors, including the nation’s biggest lenders. Now, his survival may depend on their support.

Groupe Lactalis, the French maker of President cheese that last month bought a 29 percent stake in Parmalat, had hoped to oust the company’s management at an annual meeting originally scheduled for this month. Parmalat’s board today decided to delay the assembly, giving Bondi and his allies more time to block Lactalis.

Shareholders will now meet June 25 to June 28, the company said in a statement. The decision is based on a government decree, effective March 27, that allows companies to delay annual meetings, Parmalat said.

Intesa Sanpaolo SpA and the government are mounting a campaign to keep Parmalat Italian and save Bondi’s job. Bondi, 76, has been under fire all year from investors who say he failed to invest the company’s 1.4 billion euros in financial assets on growth or return money to investors. Bondi won settlements from Parmalat’s former creditors, including UniCredit SpA and Intesa, following Italy’s biggest bankruptcy.

“Bondi’s only chance of survival hinges on the banks finding an Italian solution,” said Wolfram Mrowetz, chairman of Alisei SIM in Milan, who oversees 200 million euros and sold Parmalat shares a few weeks ago. “Bondi is a good rescuer, but he doesn’t have a global strategic vision. Lactalis and foreign investors know that.”

Government Support

Bondi got support yesterday from the Italian government, which authorized the Finance Ministry to buy stakes in companies considered strategic, including Parmalat. The Italian move matches the approach of France, which has invested 2.4 billion euros directly and indirectly in 430 “strategic” companies.

Bondi took over Parmalat in December 2003, after it collapsed in the region’s biggest bankruptcy, fueled by a decade of accounting fraud by senior management. Bondi, first as bankruptcy administrator and then CEO, accused the dairy’s biggest lenders and auditors of helping management sustain the fraud.

He brought lawsuits in Italy and the U.S. against companies including Citigroup Inc., Bank of America Corp. and Grant Thornton LLP, aimed at recovering some of the 14 billion euros of debt left in the bankruptcy’s aftermath. Bondi has built a cash position equaling about a third of the company’s market value, while Parmalat has mostly sat out the consolidation taking place in the industry.

Fight for Control

The company has lost more than 1.5 billion euros of its market value since the Jan. 31, 2007, high of 5.7 billion euros, and is worth less than it was after its first day of trading in its return to the market in 2005.

The fight for control of Parmalat, which began when a group of foreign investors in January said they would push for Bondi’s removal, has boosted the shares by 17 percent in 2011.

Intesa CEO Corrado Passera has said his bank plays an ancillary role in supporting long-term industrial projects and that a union between the dairy company and chocolatier Fererro SpA could create “enormous” opportunities. Ferrero has confirmed it’s looking at Parmalat, and Granarolo SpA, Parmalat’s biggest Italian rival, has also shown interest.

Italian Solution

A spokeswoman for UniCredit declined to comment on the lenders’ involvement in finding an Italian solution for Parmalat. Lactalis, which has said it doesn’t plan on raising its stake over 30 percent, said yesterday its 29 percent holding doesn’t represent control.

There have been 168 acquisitions of European dairy companies since 2005, worth a total $13.4 billion, according to Bloomberg data. Parmalat has made three purchases since returning to the stock market that year, the largest of which was about $54 million to buy some fresh milk operations from Australia’s National Foods Ltd., according to Bloomberg data. Lactalis has made at least 15 purchases since 2005, including the 2006 purchase of Italy’s Galbani SpA, the data show.

“In the last couple of years, Parmalat has done virtually no mergers or acquisitions or extraordinary transactions and limited itself to careful management and amassing cash,” said Daniele Demartis, a fund manager at Rome-based Agora Investments Sgr, and an owner of Parmalat shares. “A manager that maximizes value for shareholders is well overdue.”

‘Mediocre’ Management

While Bondi did a good job of recovering cash in legal settlements, “management of Parmalat’s dairy business was pretty mediocre,” said Gianluca Codagnone, head of research at Fidentiis Equities in Milan. “Parmalat didn’t expand internationally in fast-developing markets, or introduce new blockbuster products in the high-end segments.”

Parmalat’s labor unions aren’t convinced a rival Italian bid would assure growth for Parmalat.

“There’s a lot of talk about control of the company, but no talk about projects,” said Tilla Pugnetti, general secretary for the agriculture division of Cgil, Italy’s biggest labor federation. “Bondi clearly has done a great job turning the company around, but we started to criticize him strongly over the past couple of years for not developing Parmalat through acquisitions and investing.”

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