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04-05-2025 : Delaying the inevitable always has a cost

Mediobanca owns 13% of Generali, Italy's largest insurer and number 3 in Europe. This stake represents a large third of its assets and results, and gives it de facto control of Generali, which obviously contributes to its power and influence.

Mediobanca's managers have been very successful in preventing this major asset from being reflected in its share price at a discount to the sum of the parts, attracting criticism and predators. 

But there is more to life than finance; there is also power. And whoever controls Mediobanca controls Generali. Mediobanca's directors were well aware of this. But rather than resolving this dilemma, cutting off this strong point which is also their weak point, they chose, as is all too often human nature, to wait and see rather than to take pre-emptive action, thinking that the good performance of their share price on the stock market would protect them.

And the risk took the form on 24 January of a takeover bid by Monte dei Paschi di Siena (MPS), for more than a decade the sick man of European banking. When we learned that MPS was launching a non-friendly takeover bid for Mediobanca, many of us thought that the April Fool’s day was 70 days in advance this year. 

The retail bank MPS, finally back on its feet and with a market capitalisation of €9bn, wanted to become a universal bank by acquiring Mediobanca (then with a market capitalisation of €12.5bn) with its investment banking and asset management assets, . . and its 13% stake in Generali. Rather than saying MPS, better to mention its two leading private shareholders, the Caltagirone and Del Vecchio families, who are contesting Mediobanca's control of Generali, of which they are also shareholders.

To escape MPS and its two voracious shareholders, Mediobanca has just announced a takeover bid for Generali's listed private banking subsidiary. The takeover bid will be paid for in Generali shares, almost all of which will be sold. This could logically reduce the attractiveness of Mediobanca for the Caltagirone and Del Vecchio families, to whom the withdrawal of Mediobanca from Generali opens a wide door to control of the insurer. All the more so as their position in the latter's capital will be automatically boosted if Generali cancels its own shares received in return for selling its private banking subsidiary to Mediobanca.

By confessing that he had been thinking about this operation for 5 years, the head of Mediobanca is simply acknowledging that postponing the inevitable always has a cost, which could be the loss of Mediobanca independence if this clever manoeuvre fails.

If it succeeds, it will be the symbolic end of capitalism without capital in Italy, in the same way as the independence given to PAI Partners by Paribas in France, or the sale by Deutsche Bank of its stakes in German industrial groups, many years ago.

07-04-2025 : Ubisoft or squaring the circle

With negative free cash flow of €1.3bn over the last 3 years, and a share price that has plummeted 90% since its 2018 high, giving a market capitalization of €1.2bn for roughly the same amount of net bank and financial debt, Ubisoft was faced with the dilemma of finding new funds.

The dilemma was complicated by the fierce desire for independence of the founders, the Guillemots, who hold 15% of the capital and 20% of the voting rights; but without the financial means to bring in new funds, especially as part of their stake was acquired at 5 to 6 times the current price and is held via derivatives.

What's more, with Tencent now holding 49.9% of the capital of their holding company, and the latter directly holding 10% of the capital and 9% of the voting rights, the concert formed by the two parties is just below the mandatory takeover threshold of 30%. Any capital increase at Ubisoft was de facto impossible, given the Guillemots' desire to control the company. Indeed, the family, already in debt, could not participate financially. And if its ally Tencent were to take part, it would overtun the balance within the concert, leading to a compulsory takeover bid and a loss of control by the family, unable to finance it.  

In the autumn, rumours circulated that the family and Tencent were considering delisting Ubisoft. This was not formally denied. Ubisoft's share price jumped 40% at the time, even though such a move seemed unlikely for 2 reasons:

1/ the Guillemots' fierce determination to retain control, which is only real as long as no one else acquires a stake greater than theirs;

2/ the absence of positive free cash flow, making it more difficult to finance a buyout.

10 days ago, a solution, necessarily baroque given the constraints, was announced. Ubisoft will spin off its 3 best games and their teams (Assassin Creed, Far Cry and Tom Clancy's Rainbow Six) into a new entity, 25% of whose capital will be open to ... Tencent, which will contribute around €1.16bn, valuing the 3 games at 4 times their sales.

This will externalize the value of the 3 best games (at twice the entreprise value of the whole Ubisoft) and totally de-leverage Ubisoft. But it dilutes shareholders' stake in the best assets, without allowing them to vote on the restructuring or participate alongside Tencent, whose position as future controlling shareholder is clearly strengthened. It also complicates the group's structure and clarity, increases the sources of conflicts of interest between shareholders, and will inevitably be accompanied by a governance/complexity discount, difficult to quantify but very real. The return of the share price to its autumn level (-24% since the announcement) is just the evidence of this.