UBS investment bankers have been having a good run in Italy, where the bank has acted in several significant equity transactions recently. These have included the sale of Telecom Italia’s fixed network assets and the Italian government’s disposal of a stake in Banca Monte dei Paschi di Siena.
Before its merger with Credit Suisse, UBS employed almost 500 people in Italy across three divisions — wealth management, asset management and investment banking. The merger added another 300 or so.
“Merging with Credit Suisse has been very complementary [for us in Italy],” says Riccardo Mulone, UBS Italy country head and chief of the Italian investment bank. “It has been a match made in heaven.”
Investment banking in Italy
Mulone has led investment banking in Italy since 2011. During this time, UBS has advised on some milestone deals, including Fiat’s acquisition of Chrysler in 2009 and the 2015 New York Stock Exchange listing of Italian sports car maker Ferrari.
UBS was sole global co-ordinator on the Ferrari transaction. According to Mulone, it has run the initial public offering on more Italian companies in New York than any other bank.
More recently, it was lead financial adviser to global travel retailer Dufry, quoted on the SIX Swiss Exchange, when it bought Milan-listed Autogrill to create the world’s largest travel stores group. While Dufry specialises in duty-free and other travel outlets, Autogrill provides food and beverage services in airports, railway stations and on motorways in 30 countries.
Mulone knew both parties and says that a merger had been discussed in different forms for the past 10 years. “This was one of those deals where I knew, if I didn’t do it, I couldn’t retire,” he says.
Finally, towards the end of 2022, conditions were “absolutely right”. It was a two-stage transaction. Italy’s Benetton family agreed to sell its 50.3 per cent stake in Autogrill to Dufry. Its family holding company, Edizione, acquired 25 per cent of Dufry in return.
This was followed by a mandatory tender offer for the rest of Autogrill’s shares, and the company was delisted in July 2023. In October, the new business, which has combined sales of SFr13.6bn ($15.65bn), announced that it would rebrand itself as Avolta.
If repeat business is the mark of a contented client, UBS appears to have consistently satisfied one of Italy’s most iconic fashion businesses — Ermenegildo Zegna — founded in 1910. Mulone met Zegna’s eponymous chairman, Gildo Zegna, while the latter was a director of Fiat Chrysler. UBS then advised Zegna on its $500mn acquisition of New York fashion house Thom Browne in 2018.
In 2021 UBS advised Zegna on its New York listing via a special purpose acquisition company, which valued it at $3.2bn, including debt. The Spac vehicle was led by UBS CEO Sergio Ermotti.
More recently, UBS was sole financial adviser to Zegna on its acquisition of US designer Tom Ford’s business operations, establishing a long-term licence for Tom Ford fashion with US cosmetics house Estée Lauder.
As a result of this complex transaction, while Estée Lauder is sole owner of the Tom Ford brand, Zegna owns the fashion business, manufacturing and distributing all the brand’s fashion products. Zegna has been manufacturing Tom Ford’s men’s clothing since 2006.
“Brands are usually run by whoever runs the fashion business,” Mulone observes. “This is a unique case where fashion doesn’t own the brand.”
In November 2023, Telecom Italia announced it had agreed to sell its fixed-line network to Optics BidCo, a consortium controlled by US private equity house KKR. The deal, which has yet to close, is believed to be worth up to €22bn.
UBS acted as financial adviser to Italy’s Ministry of Economy and Finance, which has a stake in the KKR consortium. MEF will invest up to €2.2bn for a stake of up to 20 per cent in NetCo. With Italy poised for a major rollout of fibre broadband, the government recognises telecoms as a strategic national asset that must be up-to-date and secure. It could ensure this via strong regulation, but has chosen instead to take an equity position in the network’s owner.
TIM has a heavy debt burden and the sale marks the end of a long search for ways to monetise its network holdings and safeguard jobs.
“Options had included an attempt by KKR to buy the whole of TIM,” notes Guido Colonetti, UBS managing director responsible for sponsor coverage in Italy. He describes the eventual solution as a landmark transaction, with few precedents anywhere in the world. “It creates a smaller, more agile TIM with less debt,” Colonetti says.
The deal ruffled some feathers — most notably those of French holding company Vivendi, which owns 24 per cent of TIM. Vivendi, which is currently showing a loss on its investment, argued that the KKR offer was too low and questioned the TIM board’s decision to accept it without a shareholder vote.
The transaction, which is expected to close this summer, will reduce TIM’s debt by around €14bn. KKR will create a wholesale-only fixed digital infrastructure provider, open to all operators.
“This strategic move will expand fibre rollout and accelerate digitalisation as part of Italy’s National Recovery and Resilience Plan,” says UBS executive director Alessandro Amato. “The transaction is one of the largest-ever sponsor deals in Italy and is testament to the strength of the partnership between KKR and MEF.”
UBS was financial adviser to Italian–Dutch confectionery and chewing gum maker Perfetti Van Melle when it acquired the gum business of Mondelez International in North America and Europe for a reported $1.35bn.
The deal was announced in December 2022 and closed in October 2023, with the exception of the Portuguese part of the business, which was still waiting for local competition clearance. “It brings together well-known and complementary brands,” explains UBS executive director Urška Daneu.
Perfetti Van Melle, whose confectionery range includes Mentos and Chupa Chups, is acquiring brands such as Trident, Dentyne and Stimorol. “It distributes its products in more than 150 countries,” Daneu notes.
Bank clients
UBS’s good working relationship with MEF was underlined in November 2023 by its role as joint global coordinator and joint bookrunner in a €920mn secondary accelerated book-build in the shares of MPS.
Described by Mulone as “an incredible transaction”, it illustrated a return to health for Italy’s oldest bank. After a 2017 rescue, the government had ended up owning 68 per cent of Banca MPS. In this highly successful ABB, it sold a 25 per cent stake, reducing its holding to 39 per cent.
The shares were sold at a very slim 4.9 per cent discount to the last closing price. “The market gave credit to the government for doing a good job of managing the business, cleaning up its balance sheet and improving performance,” Mulone says.
He reckons that the bank’s share price was not reflecting its true value. “Investors saw an opportunity to invest in a high-quality bank at a good price, compared to its peers,” he believes.
They may also be hoping for a takeover bid, possibly from Banco BPM. The government has said that its exit is partly motivated by a wish to have fewer, larger banks.
In terms of size relative to market cap, the trade was the largest ABB ever done in Italy. It helped to elevate UBS to number one in the ranking for financial institutions group equity capital markets both in Italy and in the Europe, Middle East and Africa region. UBS says it is the international bank with the most secondary placements over €100mn in Italian ABBs in the past 10 years.
Mulone is not predicting a “booming” year for ECM in 2024, but says there will always be a good market for good companies. “Good companies will get the chance to tell their stories,” he says, “and there will be sensible opportunities for sensible investors.”
The year is unlikely to offer one deal after another, however. “It will be a better year than 2023, with less volatility,” he predicts. “But we will need to pick deals carefully. They will need to be hand-crafted — and that plays to our strengths.”
