If Everyone Is Free Where’s The Money?

Michael Hedges October 17, 2013 Follow on Twitter

Shifting financial winds continue to deposit sand in the doorways of major media groups. Some shareholders maintain faith in the media sector, albeit with conditions. Others are less sanguine. Consolidations, mergers, break-ups and more turmoil may have a cathartic effect.

The board of Italian media house RCS Mediagroup dissolved ahead of schedule a shareholders agreement that kept minority owners from changing positions. In July something of a battle broke out among some shareholders as the company floated a €410 million share issue and largest holder automaker Fiat doubled its holding and the shareholders pact was slated to dissolve next March.  The RCS share price rose immediately on the Milan exchange before returning to earth.

“It has been dissolved,” said industrialist, former politician and RCS minority shareholder Francesco Merloni, quoted by Reuters (October 14). “Everyone is free.” Several minority shareholders, including banks and tire-maker Pirelli, are expected to exit leaving Fiat clearly in control. “Corporate governance was messy before with shareholders interfering in management,” said an anonymous knowledgeable source to Reuters.

The RCS Board also voted to form an international advisory council of “outstanding entrepreneurs and managers whose individual expertise and track records are recognized benchmarks in their chosen areas of activity in the media and publishing industry,” said the RCS statement (October 15). Volunteer luminaries include Axel Springer chairman Mathias Döpfner, Le Monde co-publisher Xavier Niel, Tamedia chairman Pietro Supino, News Corporation CEO Robert Thomson from the publishing world and WPP CEO Martin Sorrell representing the advertising people. They’ll meet annually with Fiat chairman and RCS shareholder John Elkann and other RCS executives to “provide strategic, medium to long term perspectives and proposals that draw upon Members' unrivaled global experience.”

The shareholders pact called Consob has held 60% of the RCS Mediagroup shares dating back to 2005. Similar agreements have kept Italy’s rich and powerful rich and powerful for decades. The company publishes daily newspaper Corriere della Sera, sports daily La Gazzetta dello Sport, Spanish dailies El Mundo and Expansion and smaller newspapers and magazines.

The rift between Italian media houses, their shareholders extended, as if on cue, to Il Sole 24 Ore. Losing €45.8 million in 2012, the publisher has put its business media division and a business software subsidiary up for sale as “no longer part of the core business,” reported ilfattoquotidiano.it (October 16). Business daily Il Sole 24 Ore is majority owned by Italian employer’s federation Confindustria, whose president, Giorgio Squinzi, indicated shareholders wouldn’t be coming up with any more cash.

The board of major publisher Arnoldo Mondadori Editore shuffled executives at sales house Mondadori Pubblicità after president Angelo Sajeva resigned “for personal reasons,” according to the company statement (October 14). Mondadori CEO Ernesto Mauri takes over daily control over the sales house. The long speculated merger of Mondadori Pubblicità and Mediaset TV sales house Publitalia gained traction. The Berlusconi family primarily controls both companies.

The possibility of La Stampa sales house Publikompass merging with RCS Pubblicità sent Italian media watchers into overload with visions of a grander plan. La Stampa is owned by Fiat, which is now the biggest shareholder in RCS Mediagroup.

“Thanks to the crisis, the chickens have come home to roost and financial potentates are back to their core business,” observed affaritaliani.it (October 14). “Now that the recession has put a strain on the publishing groups, maybe Italy will discover freedom of the press. A catharsis.”

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