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May

2

2017

De Benedetti Bets on Media as Italy Business Clans Look to Sell (Bloomberg)

By Tommaso Ebhardt and Daniele Lepido

CIR chairman says family not a seller of its industrial units
Executive sees scope for new revenue from media link-up

While a number of Italian business clans have made headlines by selling family-owned businesses to foreign buyers in recent years, the De Benedettis have decided on a different approach.

By combining their media assets with Fiat Chrysler Automobiles NV’s Itedi unit, the De Benedetti family is betting it can help create a robust new player in the sluggish publishing industry, one big enough to reach the critical mass needed to stay profitable.

“We are not sellers at all in our three main business, just the opposite,”  Rodolfo De Benedetti, chairman of the family’s CIR SpA holding company, said in an interview. "We strongly believe in a portfolio focused on assets we control and manage as we don’t plan to become financial investors.”

The decision to transform a dominant holding in Gruppo Editoriale L’Espresso SpA into a smaller controlling stake in a combination with Itedi underlines the family’s “long-term commitment to the media sector,” De Benedetti said.

The combination is shaping up after Italian ad sales fell 60 percent in the past decade while newspaper circulation halved. The media deal between two of Italy’s best-known business families, announced last year and facing a shareholder vote this week, would combine the publisher of Italy’s second-biggest daily, la Repubblica, with that of La Stampa, the No. 3.

“We should not be overwhelmed by pessimism on the future of the media sector, there is still scope for print newspapers, in a virtuous integration with their online editions, to provide readers with professional, credible and quality information,” De Benedetti, 55, said. “This is not just a cost-cutting merger as there is much more, we see several areas in our portfolio where there’s room for growth and new potential revenue.”

The De Benedettis’ CIR will control the newly formed GEDI Gruppo Editoriale SpA with a 43 percent stake. Agnelli holding Exor NV will retain 4.3 percent and other investors at Fiat Chrysler will keep a 10 percent stake after the carmaker’s management decided to pull out of the publishing business and distribute its stake in the unit to its shareholders.

The De Benedetti-Agnelli link-up comes at a time of increased corporate activity throughout the distressed Italian media market. Cairo Communication last year won control of RCS Media Group SpA after beating back a rival bid from Andrea Bonomi. Il Sole 24 Ore SpA, the country’s top financial daily, is raising capital after losing 92 million euros ($100 million) last year. From 2011 to 2015, revenue at the country’s top nine publishers, which account for 70 percent of the market, fell 33 percent to 3.9 billion euros, according to researcher R&S-Mediobanca.

De Benedetti said he sees “enormous challenges” in publishing, pointing to a “structural decline in print circulation and the ‘ad crunch’ -- the drop in traditional-media advertising, including online versions, which has benefited the tech giants.” Still, growing awareness of fake online news and tech companies’ difficulties in managing content indicate that there will be a continued role for traditional media, the executive said.

Despite its scale, GEDI Gruppo Editoriale earns all of its revenue domestically and can’t expand further in the Italian newspaper sector due to antitrust constraints. So De Benedetti sees potential in international expansion in the medium term. CIR, which posted 2.6 billion euros in revenue last year, owns two other main businesses outside the publishing industry: car-parts maker Sogefi SpA and its health-care unit KOS SpA. Shares in CIR, which was founded in 1976 by Rodolfo’s father Carlo De Benedetti, have gained more than 44 percent in the past 12 months.

Though a number of Italy’s well-known business clans have recently sold assets to foreign buyers, De Benedetti said he won’t follow the trend. Recent deals have included ChemChina’s purchase of tiremaker Pirelli & C. SpA, the Pesenti family’s decision to cede 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. Former Prime Minister Silvio Berlusconi earlier this month completed the long-awaited sale of soccer club AC Milan to a little-known group of Chinese investors (source Bloomberg https://www.bloomberg.com/news/articles/2017-04-26/de-benedetti-bets-on-media-as-italy-business-clans-look-to-sell).

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2 May 2017 | 14:59 CEST