Photographer: Suzanne Plunkett/Bloomberg

Italian Clans Build Cash Pile After Record $67 Billion of Deals

  • Deals targeting Italian companies jumped 81% last year
  • Benetton, Pesenti among cash-rich families after selling units

Bankers are knocking at the door of Italy’s billionaire Benetton family. With good reason.

The family’s holding company boosted its cash pile by 1.3 billion euros ($1.45 billion) with the sale of a majority stake in airport retailer World Duty Free to Dufry AG in March. So far, Chairman Gilberto Benetton has turned down proposals from bankers pitching investments ranging from stakes in Italian cooperative banks to a paper producer. He wants the family’s $12 billion investment company to transform itself into a "sovereign fund," managing minority holdings in diversified industries.

Gilberto Benetton

Photographer: Bertrand Guay/AFP via Getty Images

The Benettons, owners of the eponymous clothing chain, aren’t the only Italian business clan attracting investment offers. After some of Italy’s best-known family companies were sold to foreign buyers in 2015, several prominent entrepreneurs find themselves spoiled for choice: they’re cash rich with an array of investment options.

"We are still in the embryonic phase of a rising trend of prominent Italian entrepreneurs seeking to diversify their fortunes after selling family assets to take a more financially-oriented role in companies across industries and countries," said Vincenzo Tortorici, head of Mergers and Acquisitions at UniCredit SpA

Deals targeting Italian companies rose 81 percent last year to $67 billion, according to data compiled by Bloomberg. The number of accords in the country jumped to 560, the highest since at least 2004. Those transactions included the purchase of tiremaker Pirelli & C. SpA by ChemChina, the Pesenti family ceding control of Italy’s biggest cement maker Italcementi SpA, and the De Longhi family’s sale of DeLclima SpA to Japan’s Mitsubishi Electric Corp.

Going Global

"As a consequence of the economic crisis, which started in 2008, some farsighted families understood that the only way to let their business survive in the global environment is to become part of bigger transnational group, leveraging on their capital, international connections and capabilities,” Tortorici said.

Now, sitting on piles of cash, these groups are weighing their options even as they expand some of their existing businesses. The Benettons, for example, are seeking partners to bolster airport operator Atlantia SpA and highway restaurants manager Autogrill SpA, people familiar with the matter said last year. At the same time, the family is restructuring its flagship apparel maker before looking for an industrial partner by the end of next year.

Selling Italy Inc.

While the downside for Italy is losing the ownership of iconic brands such as Loro Piana SpA and Alitalia SpA, the upside is preservation of jobs and opening the way for new investments by industrial families that have struggled in the last few years to expand their businesses amid the deepest recession since World War II. That’s the case of unprofitable car designer Pininfarina SpA, which was sold by the family of the same name to India’s Mahindra in December, giving a future for its Italian workers.

"We have crossed the desert in the last 10 years before finding the right partner with the financial strengths needed to help us," Chairman Paolo Pininfarina said in December after signing the agreement to sell the Turin-based company founded by his grandfather in 1930. "The world has changed so it’s an opportunity for us that an Indian group decided to invest in our future, maintaining the workforce and our Italian roots."

Foreign investors spent a record $19.7 billion in 2015 buying firms based in Italy in a sixth consecutive annual increase since 2009, according to data complied by Bloomberg. Most of the sellers were family owned businesses, which represent about 85 percent of Italian companies.

Renzi’s Blessing

Prime Minister Matteo Renzi has favored the moves as he tries to attract foreign investment to help bolster the economy as the country climbs out of the recession. The Italian government actively supported Etihad Airways ’s acquisition of the flagship airline Alitalia in 2014 and is helping the country’s second-biggest carrier Meridiana SpA find a stable future with Qatar Airways.

Renzi met with General Electric Chief Executive Officer Jeffrey Immelt Jan. 31, when the U.S. company announced it will invest more than 700 million euros in research and development facilities in Italy. He also met with Apple Inc. CEO Tim Cook, who said that the U.S. company is setting up its first European program to train mobile app developers in Italy.

"Italian family capitalism is facing some structural changes due to the opening to global markets," said Guido Corbetta, professor of strategic management in family business at Bocconi University in Milan. "There is also a generational effect with the old patriarchs passing the reins to younger members of the family who are showing a very rational approach when making strategic decisions."

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