Europe: Raiders Rising

They're shaking up the old boys' game

It all seemed so simple. When Italy's Cesare Romiti stepped down from the chairmanship of Italian auto giant Fiat last June, he received a $60 million golden handshake. Romiti quickly used part of the stake to buy 3% of blue-chip industrial and chemical group Snia. With his Italian Establishment friends packing the board, Romiti could easily control Snia and use it as a vehicle for further expansion. It was business as usual, in the tradition of Italian and European clubhouse capitalism.

Romiti, though, wasn't counting on a 74-year-old investor named Luigi Giribaldi. From his base in Monte Carlo, the gravel-voiced Giribaldi has quietly spent about $163 million to build up a 15% stake in Snia. So when Snia's shareholders meet on Jan. 28, he and allies plan to unseat Romiti and his friends. For the Italian Establishment, it will be a rare slap in the face. "In Italy, big capitalists still think that small stakes and a network of friends allow you to control big companies," says Giribaldi. "But my game is different--it's a shareholder's game."

Giribaldi is only one of a new breed of financial wheeler-dealers taking on Europe's old-boy network. Now that Europe has a single currency, shrewd investors are finding it easier to identify undervalued assets and make money from U.S.-style raids, arbitrage, and pressuring management. Giribaldi is betting he'll uncover hidden value in Snia's grab bag of assets, from hydroelectric plants to biomedical units to agricultural chemical factories. Across Europe, financially sophisticated players such as Giribaldi, Paris-based Francois Pinault, Hamburg-based Karl Ehlerding, and Switzerland's Martin Ebner are shaking up boardrooms as never before.

PYROTECHNICS. Indeed, all seems set for the financial pyrotechnics in Europe to burn even brighter. Interest rates are at rock-bottom levels not seen in a generation, just as the introduction of the euro on Jan. 1, and the planned merger of the Frankfurt and London stock exchanges--Europe's largest--make cross-border raiding easier.

The stakes are rising. Bernard Arnault, CEO of French luxury-goods group LVMH-Moet Hennessy, recently launched a $1 billion move on Italy's Gucci. Part of that raid involves LVMH picking up a bank-financed 9.5% Gucci stake held by Milan businessman Patrizio Bertelli, in what is virtually a U.S.-style arbitrage play. Bertelli's profit on his seven-month investment? A cool $85 million. "Europe is basically going from Roman times to the present in a high-speed elevator," says Rainer Kahrmann, chairman of London-based investment group EBC. "We are suddenly getting all kinds of American-style capitalism."

At the same time, the deepening European single market is pushing industry and finance to consolidate at a forced pace. In mid-January, Volvo CEO Leif Johansson, whose own company is a merger candidate, went on the offensive, paying $660 million for a 13.5% stake in truck maker Scania. It was an unprecedented hostile raid for Scandinavia. By going after Scania, Johansson is pitting himself against his ex-employers--the powerful Wallenbergs.

Part of the frenzy is being fueled by players such as Guy P. Wyser-Pratte, a 59-year-old French-born American who has a portfolio-management company in New York, and Asher B. Edelman, a U.S. takeover artist who cut his teeth in the wild '80s. Separately, the two have built up positions in intertwined French holding companies, Taittinger and Groupe du Louvre, which have assets ranging from champagne and Baccarat crystal to the Hotel Crillon in Paris. Wyser-Pratte has also bought into French supermarket chain Guyenne & Gascogne, which could become a target of giant retailer Carrefour. France, of course, has plenty of homegrown talent, such as Francois Pinault and Vincent Bollore (table).

Still, European markets are hardly as freewheeling as America's. Ownership in public companies in Continental Europe is extremely concentrated, compared with that in the U.S., where ownership tends to be widely dispersed among millions of small shareholders. And while the U.S. has an ocean of close to 10,000 listed companies, mighty Germany has just 720, while Italy has only 220.

Yet the old-boy network is coming under fire even in Germany. In the latest example of a less-than-friendly takeover, Ehlerding announced on Jan. 19, that he had snapped up 33% of privatized real estate group IVG Holding. Meanwhile, corporate powerhouses such as Allianz, Siemens, and Deutsche Bank are unbundling cross-shareholdings back home as they seekto expand internationally. "The old `Germany Inc.' is slowly dying," says Ulrich Hocker, head of Germany's small shareholders group, DSW. "I expect there will be more and more takeovers."

NO REVOLUTIONARY. Italy is opening up even faster. Its intensely clubby business Establishment once effectively shut out intruders. But as Giribaldi is showing, the elite's power is fading rapidly. Last July, legal changes cut into the power of shareholding syndicates. Secretive Milan merchant bank Mediobanca--Romiti's main financial backer--nolonger can effortlessly shift billions in assets among the rich industrial dynasties of northern Italy. And privatized behemoths such as energy group ENI and Telecom Italia are now virtually public companies--and themselves potentially open to takeovers.

Aspiring raiders still need street smarts. Giribaldi, the son of a Turinese butcher, seems to have them in spades. In 1991, he pocketed $150 million by selling a delivery business he had founded in the 1950s. His first big play was a raid on CIR and Cofide--holding companies controlled by Italian industrialist Carlo DeBenedetti, himself no mean market operator. Giribaldi's huge stakes put pressure on DeBenedetti to speed up the companies' streamlining. In March, Giribaldi sold his shares, netting profits of close to $175 million--not bad for an 18-month investment.

Giribaldi doesn't consider himself a revolutionary or a hero or anti-Establishment. He's just there to make money. If Snia management can start reorganizing assets, he figures, the company should be worth twice as much as today's $2 billion valuation. That's enough to warm the heart of any raider.