The chaos behind the LMDV-Milleri split

It cannot be said that Leonardo Maria Del Vecchio lacks a flair for the dramatic; however, to the more discerning observers, his departure from EssilorLuxottica seemed inevitable. He had too many irons in the fire, even if the ‘T-bone steak’ – to put it in non-metaphorical terms, the buyout of Luca and Paola, two of his six siblings, to become Delfin’s controlling shareholder with a 37.5 per cent stake – had been burnt before it even reached the grill due to family divisions and the caution of the banks, who require solid guarantees to finance the deal. But who could have expected such an abrupt break with Francesco Milleri, who until then had been his mentor?

Yesterday morning, Milano Finanza broke the news that LMDV, as he is known, had decided to step down from his roles as chairman of Ray-Ban and chief strategic officer. He tendered his resignation in a long and bitter letter to CEO Milleri, in which he spoke of a ‘distant and impersonal’ corporate management style. “This is not the Luxottica I grew up with. And it is not the Luxottica I remember alongside my father,” he writes without naming names, but it is clear to whom his rejection is directed: the man who leads the group, chairs Delfin – the holding company divided equally by the founder – and who has long regarded the son of Leonardo and Nicoletta Zampillo as the natural heir, not merely the primus inter pares amongst the three families that have failed to unite as one. LMDV explains that “this is not a departure from the group, but a move to clean up the governance structure”.

EssilorLuxottica’s response was cold and even defiant: “We thank Leonardo Maria for contributing to the group’s growth and to the realisation of the strategic vision envisaged by his father. We wish him every success in his new venture.” But which of his many ventures? The newspapers (Il Giornale, Il Giorno, La Nazione, Il Resto del Carlino), the restaurants, the hotels, the waters of Fiuggi, or the tech start-ups?

Whilst awaiting answers, a feeling is taking hold: we are at the end of a cycle, and there is no sign of a new one on the horizon. Thus, another great family of Italian capitalism – one of the few remaining – is adrift in a dynastic storm, unsure of where to go or what to do: liquidate what can be liquidated and set everyone free, as Rocco Basilico, one of the heirs, argues; or, as Romolo Bardin, the financial company’s chief executive – the only one with signing authority – would like, simplify matters and focus on a few solid investments: the French firm EssilorLuxottica, in which it holds a 32.4 per cent stake; the Italian firms Assicurazioni Generali, with a 10 per cent stake, and Unicredit, with a 2.4 per cent stake; as well as the property company Covivio, which is also incorporated under French law. This would mean selling the stake in Monte dei Paschi (where, with a 17.5 per cent holding, it is the largest shareholder) that controls Mediobanca, and its 13 per cent stake in Leone di Trieste (Bardin is said to have discussed this with Orcel). This would trigger a chain reaction in the great banking upheaval, from which Intesa Sanpaolo’s bid for the Sienese bank – being more straightforward and secure – would effectively emerge strengthened.

What role does LMDV intend to play, now freed from its managerial and industrial shackles? Certainly, he has no intention of giving up the goose that lays the golden eggs, not least because the banking game has yielded dividends running into the billions. Forty-three per cent of Delfin is tied up in financial assets: the banks are worth 17 billion euros, whilst the stake in Essilux is valued at 25 billion. Leonardo Del Vecchio spent his entire life in industry and only in his later years did he venture into financial deals, which were not quite as successful. Manufacturing, on the other hand, does not suit any of his heirs. To find the final thread in this labyrinth, let us begin with the Delfin shareholders’ meeting on Tuesday 30 June. Having been thwarted in his takeover bid, ‘Leonardino’ – as those who dislike him call him – attempted a comeback. The banks want firm guarantees before lending the €10 billion requested, and LMDV, as things stand, holds his 12.5 per cent stake only on paper (the will has not been accepted by everyone).

So, the youngest of the heirs proposed that the holding company as a whole should act as guarantor for him in the event of bankruptcy, rather than transferring the shares to the credit institutions. Bardin and the directors Aloyse May and Giovanni Giallombardo voted against; Milleri and Mario Notari voted in favour. Given the atmosphere, LMDV did not attend, instead levelling accusations and recriminations by letter. But why did it take it out on Milleri, who had remained loyal right to the very end? 

Perhaps you were asking whether Essilux should also be involved in some way? The shareholding structure is unclear. None of the proposals on the table has the necessary consensus (strategic decisions require near-unanimity), nor does it have Rocco Basilico’s ‘green light’ – who, according to LMDV, would have no right to use half of his mother’s share (Nicoletta Zampillo, in fact, owns 25 per cent of Delfin) – nor does it have the backing of the other siblings, who have described Leonardino’s move as a ‘putsch’. Against the backdrop of this ownership chaos lie personal issues such as the dispute with his ex-partner Sara Soldati over custody of their one-year-old daughter, which have raised eyebrows at EssilorLuxottica – a company that is not currently faring well: in seven months, it has lost 45 per cent of its market capitalisation, thereby also reducing the Del Vecchio family’s earnings. The reasons are complex (the crisis in the luxury sector, geopolitical uncertainties, and the setbacks faced by Meta’s smart glasses, which have been accused of being used for improper purposes), but the instability of the Italian shareholder has taken its toll, creating discontent and tensions amongst the shareholders. In terms of governance, the board of directors is split down the middle: seven members appointed by Delfin and seven by Essilor, reflecting a diverse group that also includes the French government via one of its financial arms and employee representatives. The arbiter is Milleri, chairman and chief executive, who is also grappling with the investigation into the takeover bid for Mediobanca (his mobile phone is still under seizure). The danger is that Essilux will become entangled in this web of interests, putting its industrial base at risk – which means jobs and employment in Italy too. Consequently, there are those who believe that Rome should intervene to provide certainty over ownership and act as a counterbalance to Paris.