As Andrea Orcel and Pier Carlo Padoan settle into their new roles as UniCredit’s respective chief executive and chairman, they face a rare and uncomfortable predicament at the bank: shareholder activism.
It is relatively unusual for any big bank to have to contend with activist investors. It is almost unheard of for a southern European bank to do so.
And Orcel and Padoan are facing that pressure from the off, without having had the chance to prove themselves.
The activist in question, Bluebell Capital Partners, is small; it only set itself up as a fund last year. Yet, it has already proven itself in a landmark success for activism in France, considered one of the hardest markets to crack for such investors. It pushed, alongside others, for French food conglomerate Danone to split the role of chairman and CEO.
Bluebell’s opening salvo at UniCredit has been to attack Padoan’s suitability for the chairman’s role.
He is a former member of parliament for the Italian city of Siena and was previously the finance minister who oversaw the 2017 bail-out of Banca Monte dei Paschi di Siena (MPS).
Vocal approach
Concern about Padoan’s influence became widespread late last year, when his arrival as director and chairman-designate preceded the surprise departure of former chief executive Jean Pierre Mustier, who vocally opposed M&A during his tenure. UniCredit’s share price fell 10% on the news.
The bank’s largest investors – including US funds such as Capital Research and Management and local investors like billionaire Leonardo del Vecchio – remained silent.
Bluebell’s more vocal approach might have a similar reaction to what happened with Danone, when criticism of the firm’s governance spurred larger institutional investors – notably Artisan Partners – to publicly express similar worries.
“We are very concerned about the capital-allocation choices that UniCredit will make,” says Giuseppe Bivona, Bluebell partner and chief investment officer.
The fund thinks Padoan’s influence has the potential to accelerate a deal with MPS and make it harder to negotiate terms with MPS in shareholders’ interests, at a time when UniCredit is in the otherwise-advantageous position of having excess capital.
Bivona nevertheless describes its approach as collaborative and says the fund has liquidity for up to three years.
He describes Orcel as “an indisputable industry leader” in whom Bluebell has confidence: “I would expect that the new CEO will do the right thing and spend enough time… to build a new strategic plan.”
Capital position
As shareholders cannot vote on chairmen in Italy, and rather than tabling an alternative slate of directors, Bluebell has so far limited itself to making its discontent known to the outgoing board, whose job it was to appoint the new chairman.
As Bivona notes, Padoan could not now have become a director so soon after having been an MP due to new Italian fit-and-proper rules that came into effect this January.
Padoan has repeatedly said that his background has nothing to do with his arrival at UniCredit or any possible acquisitions by the bank.
“The fundamental principle remains that we would never consider a transaction that would harm the bank’s capital position,” he told Euromoney last year.
Nevertheless, Bluebell was among those who voted against a motion on Orcel’s pay, which narrowly passed at the annual general meeting on April 15.
UniCredit will not disclose the final size of the package – rumoured to be €2.5 million with a €5 million signing-on bonus – until its 2021 annual report, next year.
The size of Bluebell’s own shareholding in UniCredit is similarly unclear, as it takes stakes below the disclosure threshold: perhaps just 1% or 2%.
That contrasts with the multi-billion-dollar positions taken by bigger activists elsewhere, such as Elliot Management in the US or Cevian Capital in Europe.
It also marks it out from smaller European funds, such as Petrus Advisers, which tend to target bigger stakes in smaller stocks, including banks.
Scrutiny
That said, Bluebell will try to garner support among other shareholders, as it did at Danone.
“Any responsible investor is clearly very anxious about the possibility of a deal with MPS,” says Bivona. “We want to be sure that if UniCredit does M&A, it is in the interests of its shareholders. We will scrutinise everything that happens on that front.”
The bar for any CEO of UniCredit to consider a deal with MPS should be extremely high
Giuseppe Bivona, Bluebell
Bluebell has already built a stake of just over 1% in another Italian bank, Mediobanca, and challenged its long-standing allocation of capital to a stake in insurer Generali. Despite shareholders’ rejection of Bluebell’s slate of candidates for Mediobanca’s board last October, Bivona claims the names were recognised as being of high calibre. Bluebell also encouraged a change in Mediobanca’s bylaws around the appointment of its chief executive.
Bivona and his colleagues have followed the MPS situation for the best part of a decade, often while working as advisers for US hedge funds. He says that – at best – MPS would present great execution risk for UniCredit.
He doubts the government could offer a deal anything like as attractive as the one Intesa Sanpaolo got for the parts of two failing Venetian banks in 2017.
“The bar for any CEO of UniCredit to consider a deal with MPS should be extremely high,” he states.
