Generali battle heats up as No.2 investor quits board

© Reuters. FILE PHOTO: The logo of insurance company Generali is seen on the company headquarters in Budapest, Hungary, November 29, 2019. Picture taken November 29, 2019. REUTERS/Tamas Kaszas/File Photo

By Stefano Bernabei, Gianluca Semeraro and Claudia Cristoferi

MILAN (Reuters) -A boardroom battle at Generali (MI:GASI) has escalated after the No.2 investor in Italy's biggest insurer resigned from the board in a challenge to the reappointment of CEO Philippe Donnet.

Donnet, who is seeking a new mandate as CEO, is at the centre of a struggle between Generali's biggest investors, including construction and newspaper magnate Francesco Gaetano Caltagirone, who on Thursday stepped down from the board.

Caltagirone has teamed up with eyewear billionaire Leonardo Del Vecchio, the insurer's third-largest shareholder, to challenge the influence investment bank Mediobanca (OTC:MDIBY), Generali's biggest investor.

Caltagirone holds 8.04% of Generali, trailing Mediobanca's near 13% stake. Del Vecchio is the No.3 investor with nearly 7%.

The two tycoons blame Mediobanca, which reaps a sizeable share of its income from Generali, for holding back the insurer's expansion, people close to the matter have said.

Donnet, who is backed by Mediobanca and a majority of board members, in December announced Generali's first buyback in 15 years and higher dividends in a bid to keep his job.

With Italy's financial sector in consolidation mode, the shareholder tensions are fuelling speculation about possible M&A moves involving both Generali and Mediobanca.

Del Vecchio, 86, in 2019 became Mediobanca's biggest shareholder. Caltagirone has also recently built a stake in Mediobanca.

Caltagirone and Del Vecchio in February are set to present their own CEO candidate and an alternative strategy for the insurer, a person close to the matter told Reuters on Friday.

Caltagirone began his offensive in April when he snubbed a general meeting to approve Generali's results.

In a sign of growing hostility, he voted against Donnet's new strategy in December and has not attended board meetings lately, a second person with knowledge of the matter said.

He joined forced with Del Vecchio in September and their consultation pact over Generali, which includes also smaller investor CRT, controls a stake of more than 16% in the insurer.

The pact remains intact after Caltagirone's resignation, a third source close to Del Vecchio added.

To carry more weight at a general shareholder meeting in April to appoint a new board, Mediobanca has borrowed shares to reach a 17% voting stake.

But around 35% of Generali's share capital is in the hands of institutional investors and small savers hold another 23%, meaning their votes are likely to decide the outcome.