Enrico Cuccia

Wednesday, 23 June 2004

Milan, June 23 2000. Enrico Cuccia, honorary chairman of investment bank Mediobanca SpA, and the most prominent Italian financier in the post-war era, died this morning in a Milan heart clinic. He was 92 years old. The news of the death was confirmed by the Fondazione Monzino cardiac center, where Cuccia died of heart failure.

Of Europe's 10 most influential businessmen of the 20th century only one is still living – 92-year-old Italian Enrico Cuccia, who some would argue was the most influential of all.

Greatness can be achieved by living a long time and by delaying retirement. By looking at the fragile frame of the 92-year-old Enrico Cuccia, it seems remarkable to imagine that this is the man who was still Italy's most powerful businessman and had been since the Second World War. His influence has been felt since 1946 when he became head of merchant bank Mediobanca, undeniably Italy's most influential organisation.

Mediobanca dominates Italian business, much to the chagrin of just about everyone who has to pay its boss Enrico Cuccia more than lip service. Recently he was challenged three times in some of the biggest business deals Italy has ever seen. Three times he not only beat off the challenge but absolutely destroyed the challengers. Today Cuccia is honorary chairman of the bank, leaving operational control in the hands of the 61-year-old Vincenzo Maranghi and his star protégé Matteo Arpe.

But no one doubts who is the boss. It is Cuccia, who has even more influence now than he had 30 years ago when he was assumed to be at the height of his powers. Behind the scenes, Cuccia exerts control over Mediobanca, which has been at the centre of all the machinations and transformations of Italian capitalism, from the birth of chemical company Montedison in 1966 to Olivetti's takeover of Telecom Italia in 1999.

For one who is so influential, and indeed crucial, in the workings of a whole country's business, Cuccia has remained obscure and inconsequential to most Italians. He has never given a media interview and is only photographed walking from his modest flat to his 17th century palazzo offices at 10 Via Filodrammatici in Milan, next door to the famed La Scala opera house. Mediobanca's base and Cuccia's seat of power bears no plaque in the reception. In fact much of Cuccia's power came from his own disdain for personal wealth and its trappings. It simply didn't matter to him and he has never had to spend time chasing it. What has always counted to him was personal power. It is the reason he never attracted any personal attention or jealousy. No one could be jealous of a man of such extreme frugality. He has no personal wealth and has always lived for his work. His remuneration has always been absolute power. It made him a man who, for the most part, was unnoticed in his activities, although no one who worked at Mediobanca was unaware of him.

The Sicilian-born son of a bureaucrat, Cuccia built his position of power by a mixture of luck and some incredible manoeuvrings that have persisted even in his 93rd year. In fact, observers say he has got better and sharper as he has got older. Certainly some of his biggest coups were pulled off in 1999. He started life by marrying well, to the daughter of Alberto Benduce. Benduce was chairman of Italy's largest state holding company, IRI, and introduced his new son-in-law to everyone that mattered. He began his career with Banco Commerciale Italiana in 1938. He was the protégé of then president of Banca Commerciale Italiana (BCI) Raffaele Mattioli.

From that base Cuccia set up his own network and one that was soon more powerful than those of his father-in-law and his mentor. Cuccia's network incorporated Italy's salotto buono, the Italian financial elite, who included the Agnelli and Pirelli families. Cuccia befriended and struck deals and raised money for them all. For decades his friendship with Fiat's Gianni Agnelli helped both men to dominate Italian business. The key to his power has always been Mediobanca, which was set up to help finance private industry as part of the regeneration programme after the Second World War. Mediobanca's origins came from conversations between Cuccia and BCI president Mattioli in 1944. Mattioli wanted to start up a medium-term credit agency to help finance reconstruction of Italy. Mediobanca has two divisions. It is a conventional investment bank that arranges financing for Italian companies and takes them public, and a holding company that has small but influential stakes in a number of high profile companies.

Eight years after joining BCI Cuccia was appointed to head the newly-formed Mediobanca, at the age of only 39 in 1946. He scrapped any notions that Mediobanca would act as a public service financial institute. Instead it became a means for Cuccia to exert his power on Italian institutions. Mediobanca became Italy's most powerful commercial organisation and Cuccia answered to nobody except himself. His appointment was for life. And it was set to be a long life. His power was consolidated by an extraordinary alliance with merchant bankers Lazard Freres. The link with Lazard gave Cuccia access to its sister firms in France, Britain and America. He became the centre of fund-raising for Italy's big business. He had links to all the banks and even powerful people began to rely on Cuccia for help whenever cash was needed.

Cuccia bought small but influential shareholdings in most of Italy's most important companies. He created an intricate and complicated web of cross shareholdings in Italy's conglomerates. So cleverly was the web spun that Cuccia could influence the outcome of every major deal. Medibanca held key minority stakes in the biggest names in Italian business from Fiat, Pirelli and Montedison to Mondadori, Zanussi and insurance giant Assicurazioni Generali. The nature of Mediobanca's minority holdings meant Cuccia could decide on the terms of share and bond issues. It was said he could stop or instigate events and make or break any deal by one simple phone call.

One of the most important relationships he had was with Fiat. For decades Cuccia had enjoyed a privileged friendship with Gianni Agnelli, now honorary chairman of Fiat. Cuccia had key shareholding in a number of Agnelli's companies. But it was in 1999 that Cuccia produced the biggest rabbits from the hat. In 1998 stories had abounded in the Italian newspapers that finally Cuccia, in his nineties, was unable to maintain his hold on the Italian business world. The stores surprised many international observers who assumed Cucci had long since died. Mediobanca's empire appeared to be crumbling. Morgan Stanley and Goldman Sachs, plus a host of other American investment banks, were muscling in on Mediobanca's turf advising Italian companies and suggesting deals.

But, unknown to anyone, Cuccia understood his mortality and, apart from Vincenzo Maranghi, was nurturing a bright new investment banking star of his own called Matteo Arpe. His innovative ideas had already been noticed – Arpe had helped launch a Mediobanca venture capital fund in the American style. In early 1999 Cuccia embarked on the biggest adventure of his long career. He backed tiny telecoms company Olivetti in its bid for the state telephone monopoly Telecom Italia. When the bid was announced no one mentioned Cuccia. In fact one prominent journalist admitted he had assumed Cuccia was dead when he wrote an article in the bid's opening stages. Olivetti was just a fifth the size of Telecom Italia and Deutsche Telekom, with its huge financial resources, made a counter bid.

Analysts believed Olivetti would be unable to find the funding. It appeared that Cuccia had backed the wrong horse. Even his old friends Lazards and the Agnellis backed Telecom Italia. Cuccia's extraordinary influence and ingenious plan won the day for Olivetti and some €70 million in fees. Engineered by Matteo Arpe, the unlikeliest and greatest takeover in European financial history succeeded and Cuccia's backing of Roberto Colanino's opportunistic bid for Telecom Italia is an unequalled triumph.

But his 1999 had only just started when four Italian financial institutions tried to bend his will. Assuming that Cuccia was finished Milan-based Unicredito Italiano announced that it was merging with Italy's biggest commercial bank, Banca Commerciale Italiana. About the same time northern San Paolo-IMI said it would join up with southern- based Banca di Roma. None of the four had cleared the deals with Mediobanca, and Cuccia was as surprised as readers of Italy's newspapers at the news. That was a situation he neither liked nor would tolerate. He could see it would be a test of his power in the modern age. He set about destroying both deals with devastating success. The stakes were indeed high. Unicredito's Alessandro Profumo was already being hailed as the next Cuccia. Cuccia was reportedly 'seized by panic' at that concept.

Considering the need for the country to consolidate its banking sector, Italy's establishment thought the mergers were suitable. Banking analysts were in agreement but Cuccia decided that he didn't want either deal to happen. Unicredito's merger with BCI and San Paulo's with Banca di Roma both collapsed. Not only that but Cuccia saw that Banca Commerciale Italiana's top management were sacked and his hand-picked team installed to replace them. And then he made a different deal that he liked. The bank will merge instead with one of Italy's large bank holding companies, Banca Intesa, in a deal brokered by Cuccia. There was no commercial logic to any of it. It was just a reflection of Cuccia's power. And he desperately needed to reassert his power for one stunning reason. The merger of Unicredito and BCI would have brought together both institutions' identical 8.5 per cent stakes in Mediobanca, a relic of the way the bank was set up after the war, with ownership split between Italy's leading financial institutions. Cuccia alone realised that after the merger – something no one else had noticed – the merged institution would own 17 per cent of Mediobanca, and for the first time would have been able to remove Cuccia. Unicredito's Profumo, a former McKinsey man, would have replaced Cuccia as Italy's most powerful man. And Italy's leaders would have probably welcomed it. They had previously hailed the Unicredito-BCI merger as part of a necessary consolidation in the Italian banking sector.

After he had fixed the merger, Cuccia took revenge, not against Profumo, who was too powerful, but against Antoine Bernheim, chairman of the board of Italian insurer Generali and a partner in Lazard Freres. It was Bernheim who Cuccia suspected was behind the threat to his power. Bernheim was previously deputy chairman of Mediobanca when Lazard and Mediobanca were still allies. The alliance between Lazard and Mediobanca had been all-powerful but in the early nineties had come undone. Bernheim's humiliation was a warning to Lazard Freres. Mediobanca's Enrico Cuccia has lived two generations of bankers beyond his expected demise. He has used those 20 extra years to consolidate his power base in Italy. The last year of the 20th century proved to be Enrico Cuccia's best year ever. He faced all the challenges and emerged from every bruising financial battle and tricky situation even more powerful than before.

Author: Catherine Monk

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