MILAN, (Reuters Breakingviews) - Two of Italy’s best-known business dynasties are swapping roles as guardians of the free press. Fiat scion John Elkann is mimicking Amazon.com founder Jeff Bezos and Salesforce.com boss Marc Benioff in acquiring a struggling editorial trophy, in this case the owner of Italian daily La Repubblica. Even if he doesn’t have a magic touch, Elkann at least has the resources.
Elkann’s advance into media marks another Italian dynasty’s retreat. GEDI, the company in question, has been caught in a tug of war between business tycoon Carlo De Benedetti and his children. Having transferred his stake to them seven years ago, De Benedetti senior tried to snatch back control last month by offering to buy a near-30% stake. Now his offspring are selling their stake to Elkann’s family holding company, Exor, effectively burying the hatchet.
At first glance, the price looks extravagant. Exor will pay a 64% premium to buy 44% of GEDI from the De Benedetti-controlled holding company CIR, totalling 102.5 million euros. It will then launch a takeover offer on the rest of the group, at the same price. Exor’s total bill will come to be just below 200 million euros once its own 6% stake and the 5% that CIR plans to reinvest are taken out.
Look past the hefty premium, though, and what Elkann is paying is not so rich. At some 6.7 times its expected 2019 EBITDA, according to Refinitiv, the offer is not too far off average multiples for the Italian media sector. Also, Exor – which is the top shareholder in automaker Fiat Chrysler Automobiles – is flush with cash. It is set to receive some 1.6 billion euros in dividends from the imminent merger of FCA with Peugeot.
That cash will come in useful. A decade-long shrinkage in Italian newspaper readership has taken a toll on GEDI’s revenue, and partly explains the 90% drop in its share price over that time. Elkann has media experience – his family used to control La Stampa, a newspaper that’s now also part of GEDI. And Exor currently part-owns The Economist. But revenue at that newspaper has barely improved since 2015. Perhaps his resolve, and his capital, will yield more visible results this time.
- Exor, a holding company controlled by Italy’s Agnelli family, said on Dec. 2 it had agreed to buy 43.8% of media group GEDI for 0.46 euros a share, or 102.5 million euros, a 64% premium on the closing price prior to the announcement. The seller is CIR, a company controlled by the De Benedetti family.
- Exor, which already owned 6% of GEDI, will then launch a takeover offer at the same price for the whole group. CIR will reinvest in the company and take a 5% stake.
- GEDI is the publisher of prominent Italian newspapers La Repubblica and La Stampa.
(Editing by John Foley and Leigh Anderson)
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