The MasterBlog: Industrialist Heir to the #Fiat Dynasty Charts His Course @NYTimes
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Tuesday, August 4, 2015

Industrialist Heir to the #Fiat Dynasty Charts His Course @NYTimes

John #Elkann continues to consolidate the Agnelli empire through Exor's purchase of PartnerRe reinsurance  business.

Industrialist Heir to the Fiat Dynasty Charts His Course

Takeover battles are often high drama, played out with heated words and outsize personalities.

Yet a protracted fight over a Bermuda insurance company was won by a 39-year-old deal maker — John Elkann — whose quiet, persistent style has been quickly reshaping the empire of Italy’s best-known industrial dynasty.

Mr. Elkann, the grandson of Gianni Agnelli, has run the $12 billion Agnelli family investment firm Exor for more than a decade. With Monday’s $6.9 billion acquisition of the insurer PartnerRe, he has clinched his biggest deal yet.

The acquisition represents a new level of ambition for Mr. Elkann as he seeks to continue building Exor into a global conglomerate. Even as the Italian firm disposes of holdings like the real estate services company Cushman & Wakefield, it is seeking to expand its stake in the Economist Group, publisher of The Economist, and turn Fiat Chrysler into a consolidator within the global auto industry.

“We really do see ourselves as a business builder,” Mr. Elkann said in a telephone interview.

As Exor’s ambitions grow, however, it may face more obstacles, including more takeover targets — perhaps even General Motors itself — who have no intention of selling.

Empire-building may not seem like the natural course for the soft-spoken Mr. Elkann. He does not pursue the spotlight as lustily as did his grandfather — who was known for his custom suits and for once crashing a Ferrari into a meat truck at 120 miles an hour — and his brother, Lapo, an entrepreneur and socialite.

But Mr. Elkann has consolidated the Agnellis’ holdings into one vehicle, Exor. And most crucially, he helped oversee the revival of Fiat, which his family helped to create more than a century ago. Now, under his mentor, Sergio Marchionne, Fiat has grown, in part by buying Chrysler as part of the American carmaker’s government-backed turnaround.

The son of Margherita Agnelli and Alain Elkann, a French-Italian writer, John Elkann had long been groomed to play a role in his family’s business. Born in New York City and raised in Britain, Brazil and Paris, he took jobs within the business at a young age. At 21 years old, he took a seat on the board of Fiat.

But he was thrust unexpectedly into leading the family holdings a half-decade later, after the deaths of his grandfather and his great-uncle Umberto. Fiat, mired in billions of dollars in debt, was under pressure from lenders to sell.

And the chief executive of Fiat at the time tried to seize control of the carmaker by seeking to become chairman as well. The Agnelli family refused, paving the way for a change of chief executive. Filling that role in 2004 was Mr. Marchionne, an outspoken longtime executive within the family’s holding who was tasked with the huge turnaround.

“As I reflect on the past 10 years, there’s no doubt that the most difficult situation was around the car business,” Mr. Elkann said.

Mr. Marchionne spearheaded a revival of Fiat, putting it in a position in 2009 to buy the struggling Chrysler. Initially looked at with skepticism, the merger of the carmakers worked. The stock of the combined Fiat Chrysler Automobiles has risen nearly 81 percent since the company went public last year. (The family maintains a roughly 29 percent stake in the manufacturer.)

And Exor’s financial performance has improved as well. The conglomerate’s net asset value, or the worth of its investments, rose nearly 15 percent last year, to 10.2 billion euros.

Exor has also embarked on other deals. Two years ago, it agreed to sell its stake in SGS, a Swiss testing company, for $2.6 billion. This year, the firm backed the $2 billion sale of Cushman & Wakefield to another real estate company after having helped expand Cushman & Wakefield’s business.

And Exor is helping Fiat Chrysler take Ferrari public, though still retaining a big stake in the sports-car maker in the process.

Among Exor’s other holdings are CNH, a maker of construction equipment, and the reigning champions of Italian soccer, Juventus.

To Mr. Elkann, the moves have been to rebalance Exor’s businesses portfolio and make it more global. Where a decade ago the investment vehicle drew three-quarters of its sales from Europe, today it draws less than one-third from the Continent.

That move to internationalize one of Italy’s established manufacturers has sometimes prompted jabs from rivals. Diego Della Valle, the head of the Tod’s luxury goods empire, said last year that the Agnellis “had and took everything from Italy and the Italians, and in the moment of need, ran away in the half-light to settle best they could their personal business.”

Still, for Mr. Elkann, the most pressing step to continuing his strategy was buying a services business that generated consistent profits and counterbalanced the industrial operations. A natural target, according to Mr. Elkann, was PartnerRe, a reinsurer that Exor helped create in 1993.

Doing so meant halting PartnerRe’s own plans to merge with a competitor, Axis Capital Holdings. Exor publicly enticed PartnerRe shareholders with a succession of higher-priced offers. Despite months of resistance from the takeover target, the Italian conglomerate was able to sway several influential investor advisory firms that recommended rejecting the merger with Axis.

On Monday, four days before PartnerRe shareholders were set to vote on the Axis deal, the reinsurer agreed to sell itself to Exor for $140.50 a share and a special preclosing dividend of $3 a share.

“We have carefully and thoroughly evaluated each development over the last several months, and believe that this thoughtful and deliberate approach was critical to delivering a transaction that represents a significant improvement in the price and terms of Exor’s original proposal,” Jean-Paul L. Montupet, PartnerRe’s chairman, said in a statement.

Mr. Elkann sought to model his management in part on a number of other successful family investors. He has met with Warren E. Buffett of Berkshire Hathaway, as well as Sweden’s Wallenberg family and Jorge Paulo Lemann, the Brazilian billionaire whose 3G Capital controls Burger King and Heinz.

But Mr. Elkann insists that he is charting his own path, creating what he describes as a company focused on managing permanent capital and building businesses. For now, that means digesting PartnerRe. Yet he conceded that the cash PartnerRe generates could help finance future deals, much as Berkshire Hathaway’s insurance operations provide the firepower for Mr. Buffett’s deal making.

Even as Exor pursued PartnerRe, however, its most prominent investment was floating potential deals of its own, with Mr. Elkann’s backing. Mr. Marchionne has said publicly that he hopes to be a consolidator.

So far, the most natural merger partner, G.M., has flatly refused to entertain the notion, despite Mr. Marchionne’s and Mr. Elkann’s arguments.

“The best thing we can do is to be totally focused on the G.M. shareholder and to execute our plan,” Mary T. Barra, G.M.’s chief executive, said in June.

Nevertheless, Mr. Elkann said that Exor would eventually seek out other investment opportunities to continue its quest for growth.

“If you look at the last 10 years, we’ve really simplified, from many holding companies to one,” Mr. Elkann said. “The next decade ahead is going to be more of a decade where we build and try to grow Exor.”

Insalist Heir to the Fiat Dynasty Charts His Course -

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