Arnoldo Mondadori Editor S.p.A.

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Arnoldo Mondadori Editor S.p.A.

via Arnoldo Mondadori 1
20090 Segrate
Milan, Italy
(02) 75421
Fax: (02) 7542 2302

Public Company
Incorporated: 1912 as La Sociale di A. Mondadori & C.
Employees: 5,700
Sales: L2.37 billion (US$2.10 million)
Stock Exchanges: Milan Rome Turin Trieste Florence Genoa

Arnoldo Mondadori Editore S.p.A. is one of the largest publishing companies in Italy. Its holdings include books, magazines, advertising agencies, printing activities, direct marketing, stationery, school supplies, and a host of small publishing companies and imprints.

Arnoldo Mondadori was the son of a poor craftsman in the northern Italian city of Ostiglia, near Mantua. Before going to work for a small printing company in his town, Mondadori held various jobs including a stint at the local cinema. In a community with an illiteracy rate of almost 40%, one of his responsibilities was reading aloud the titles of silent films for audiences. At the age of 16 he was hired as a pressman at Ostiglia’s small printing and stationery concern, Fratelli Manzoli. Two years later, in 1907, Arnoldo Mondadori borrowed enough money to take over the company. He changed its name to La Sociale. The new name reflected Mondadori’s espousal of humanitarian and socialist reform movements active in Italy at this time, as well as his own ideal view of the press as a diffuser of culture. That same year the company, previously limited to the printing of posters, letterheads, and pamphlets, began publishing Luce!, a magazine subtitled Giornale Popolare Istruttivo.

In 1911, Mondadori bought a new press and published his first two books, Aia Madama and Nullino e Stellina by Tomaso Monicelli, an ex-socialist who had moved toward a nationalist position. Arnoldo Mondadori married Monicelli’s sister, Andreina, in 1913.

La Sociale di A. Mondadori & C. was incorporated in 1912 as a limited stock partnership with 15 employees. Stock was held almost entirely by the Mondadori family. At that time, the press initiated a series of children’s books called La Lampada. The company’s capital grew from L75,000 in 1913 to L400,000 the following year, and the staff more than doubled. Already, Mondadori set about competing actively with the two Milan-based publishers, Sonzogno and Fratelli Treves, that shared a monopoly on book publishing in northern Italy at that time.

The company grew rapidly during the period of World War I in Europe. In 1915, the town of Ostiglia granted Mondadori a site measuring 2,000 square meters, adjacent to the railway line. New equipment was purchased. The number of employees at the new plant reached 100.

In 1916 the death of Mondadori’s former competitor, Emilio Treves, left available a catalog of authors that included many of the most prestigious names in contemporary Italian literature, among them Gabriele D’Annunzio, Luigi Pirandello, and Grazia Deledda. The acquisition in 1917 of the Franchini printing plant in the city of Verona put Mondadori in a position to sign on many of Treves’s authors and to attract important new clients, including the Italian military. Mondadori also contracted to produce several illustrated magazines for the Third Army.

In 1921 Mondadori consolidated all printing activities at Verona. The old Franchini plant was replaced by a new press that covered almost 100,000 square feet of land. Employees numbered 250 and Mondadori at this time created a separate magazine department. Fiction magazines were especially popular and in the early 1920s Mondadori introduced Italy’s first monthly women’s magazine, La Donna, and Le Grazie, a fiction magazine.

By this time, Mondadori magazines also served the Italian immigrant communities which had developed in North and South America—the bi-weekly Girogirotondo sold 30,000 copies in Argentina alone. Other popular ventures were film and theatrical magazines.

In 1923, publishing management was also established in Milan. Building on the newly literate readership of common Italians, Mondadori initiated several series, and brought out a children’s encyclopedia, the Enciclopedia dei Ragazzi, modeled on English and American counterparts, and sold in weekly issues. The first Italian gravure magazine was published by Mondadori in 1925.

The decade of the 1920s was characterized by three major innovations for Mondadori: the company published its first textbook in 1926, its first popular paperback in 1927, and, in 1929, the so-called giallo or detective thriller. The series I gialli di Mondadori was packaged in a soft yellow jacket; today the word giallo is an Italian genre term for mysteries or thrillers, in print, radio, or film.

In 1930, Mondadori introduced its first Italian translations of foreign authors in accessible paperback form, with the Libri Azzurri (Blue Books) series, six years before the appearance of Penguin books in the United Kingdom. Other series of translations in paperback included Biblioteca Romantica— a collection of 50 masterpieces of 17th- and-18th century fiction—and i Romanzi delta Palmar.” Mondadori’s translators included Cesare Pavese and Eugenio Montale.

Another important foreign acquisition for Mondadori’s list was the Walt Disney Company’s cartoon character, Mickey Mouse, who endeared himself to Italians under the name Topolino, appearing in a weekly series in 1935. This success was repeated shortly after by Donald Duck (Paperino), in the first Disney story conceived and produced in Italy by agreement with the U.S. company. Grazia, the first mass-circulation women’s weekly, was introduced in the late 1930s, and the weekly news magazine Tempo began publishing under the direction of Arnoldo Mondadori’s son, Alberto. Alberto Mondadori was eldest of the founder’s children, who included another son Giorgio and two daughters, Laura and Cristina. All were to play an important part in the company’s füture development.

World War II in Europe had a devastating effect on Mondadori. Mondadori was compelled to transfer its editorial offices to the town of Arona in 1942. When the Fascist government fell and German troops occupied Italy in 1943, the plant at Verona was confiscated, its equipment dismantled and in large part shipped off to Germany. The Milan headquarters later sustained severe bomb damage and the offices at Arona came under the control of the Fascist party commissars.

From 1943 to 1945, Arnoldo Mondadori went into exile at Lugano, Switzerland, but continued to maintain contact with his editors and authors. With the help of his son Alberto Mondadori—who spoke English and other languages—the publisher acquired rights to the work of U.S. authors Ernest Hemingway and William Faulkner, which later helped the company regain its position after the war ended.

With funds from the U.S. Marshall Plan, Mondadori launched a postwar recovery and replaced its bomb-damaged Verona plant. The new facility was much larger, and included modern equipment capable of newspaper publishing. In 1950 Época appeared, a new large-format illustrated news weekly modeled on Time and Life.

Italy’s economy began a period of tremendous growth in the postwar years. Mondadori introduced direct marketing with the first Italian book club, Club degli Editori, by-passing the bookstores to sell books by mail. In 1958 Alberto Mondadori founded II Saggiatore, an imprint of Mondadori that specialized in philosophy and intellectual works. The project was initiated with 150 employees and intentions of publishing 100 new titles each year, II Saggiatore brought out the likes of Jean-Paul Sartre, and Claude Levi-Strauss in Italian translations, but the company was plagued with financial problems. In 1967, Alberto Mondadori broke from the parent company and two years later a bankrupt II Saggiatore was reassumed by Arnoldo Mondadori Editore.

The younger son, Giorgio Mondadori, was a more effective manager who had joined the company at the age of 27, in 1944. After overseeing the rebuilding of the Verona plant, he turned to a program of diversification. This included Mondadori’s entrance into industrial activity with the establishment in 1961 of Auguri Mondadori S.p.A., a stationery and greeting card operation with a huge plant at Caselle di Sommacampagna near Verona and the building of Cartiere Ascoli Piceno, a papermaker which opened its plant at Marino del Tronto in 1964. Giorgio Mondadori also directed the building of the company’s present headquarters at Segrate, a vast, modern edifice designed by the architect Oscar Niemeyer.

In 1960 the company had annual gross profits of L16 billion and employed 2,279 workers. During the decade that followed, the company founded by Arnoldo Mondadori profited from his friendship with two captains of the Italian banking industry, Raffaele Mattioli and Enrico Cuccia.

Mondadori preferred stock was listed on the Milan stock exchange in 1965. Five years later, annual gross sales stood at L71 billion. The company employed 4,988 people and was ranked first in the Italian publishing industry in gross sales.

Publishing expansion in the 1960s included the founding of Panorama, which first appeared as a monthly in 1962, and became a weekly in 1967. In 1963 Mondadori initiated its Enciclopedia della Scienza e della Técnica, a 15-volume work whose authors included several Nobel prize winners. Mondadori’s practice of putting inexpensive works of literature on newsstands continued with the introduction of the Oscar series of highly successful fiction paperbacks.

The decade that followed brought difficulties. The family patriarch, Arnoldo Mondadori, died in 1971, leaving the company to his four children. The second son, Giorgio Mondadori, took over as president of the publishing empire in 1968. A few years later, Mondadori administration was moved from Milan to the new headquarters at Segrate. During the 1970s, expansion of industrial activity continued with the acquisition of two new printing plants in Vicenza, San Donato Milanese, and the establishment of a new plant at Cíes. In 1975, yet another was acquired in Toledo, Spain.

In 1975, spurred on by the purchase of the top-selling Italian daily Corriere della Sera by Mondadori’s competitor Rizzoli, the company joined in founding what would be its first daily newspaper, la Repubblica. The newspaper was founded as a joint venture by Mondadori and L’Espresso, the top news weekly competing with Mondadori’s Panorama magazine. A holding company, Editoriale L’Espresso, was formed, with 50% of the capital, L1 billion, shared by Mondadori and the L’Espresso group, which included the new newspaper’s editors Eugenio Scalfari and Carlo Caracciolo.

Giorgio Mondadori held the chairmanship of Mondadori until 1976. His sisters Cristina and Laura Mondadori joined in forcing their brother Giorgio from the company and he was succeeded as chairman by Mario Formenton, husband of Cristina, the youngest Mondadori daughter.

Meanwhile, la Repubblica was quickly gaining in stature and sales, thanks in part to its outspoken editorial positions on the political events of the decade. The newspaper opposed negotiations with the leftist terrorists who kidnapped and assassinated Italian statesman Aldo Moro in 1978. Competition from the largest Italian daily, Corriere della Sera, was later handicapped by the implication of Corriere’s parent, Rizzoli Publishing, in the political scandals of the early 1980s. By virtue of its editorial independence, la Repubblica was widely seen as a bastion of integrity. Already by 1979, la Repubblica was no longer losing money and had begun to command an appreciable market share. Shortly thereafter the new paper began showing increasing profits.

The late 1970s and early 1980s brought a period of decline for the Mondadori group. The economic boom years of the postwar era were drawing to a close in Italy. In 1975 the company suffered from a fall-off in its advertising and publicity revenues. The signal event of this period, which set the stage for the acrimonious boardroom battles at the end of the decade, was Mondadori’s entrance into the television market, with the creation of the Italian network Retequattro.

Guided by Mario Formenton in 1978 Mondadori established Gestione Pubblicitaria Editoriale (Gpe), an advertising agency for 18 local channels. Two years later, the company entered directly into broadcasting activity with a second enterprise, Telemond, which bought and resold television programming. In 1982, the companies were reconstituted as the network Retequattro.

The ill-fated venture occurred in an unfamiliar market environment dominated by two major competitors. First was the state-owned radio and television network which had in 1976 relinquished the monopoly on television programming it held since 1954. The second was media baron Silvio Berlusconi’s Fininvest Group, which was at the time amassing a vast empire of small local stations. Retequattro’s managers withheld from such expansion in the mistaken belief that a law would shortly be passed impeding the growth of national monopolies in television.

Late in 1982, with the acquisition of the Italian channel Italia 1 by Fininvest, Retequattro found itself in a low position in audience ratings. Retequattro was unable to compete effectively with the maverick Berlusconi.

At the same time, Mondadori was involved in a program of expansion in its other sectors. Daily newspaper activity increased with the introduction of four provincial papers published by a subsidiary, Editoriale Le Gazzette. In addition, the Mondadori group reached an agreement with the Canadian Harlequin group in 1981 for the publication in Italy of its romance novels, and in 1983 acquired another papermaking concern, Cartiera F.A. Marsoni of Treviso.

At the end of 1983, Mario Formenton turned the failing Retequattro over to Leonardo Forneron Mondadori, the son of Laura Mondadori, who had legally been given his grandfather’s family name. Leonardo Mondadori had worked in the company since 1972, and had successfully directed the book publishing activity. Initially the younger manager improved the network, but the losses had already become too great and in late 1984 Mario Formenton sought a buyer for Retequattro.

The situation in 1984 was one of near-emergency for Mondadori, with Retequattro losing L10 billion each month. The network was eventually sold to Fininvest. However the losses had been too great. The consolidated balance of the company in 1984 showed losses of L10.7 billion. Salvaging the company required a recapitalization of the order of at least L50 billion.

With help from associates in the financial world, Mario Formenton and Leonardo Mondadori created a holding company, AME Finanziaria (AMEF) in 1985. To create the new company, the two families contributed just over 50% in Mondadori shares, while the other partners contributed capital. Since the Mondadori shares constituted a majority in the holding company, the family remained in control—of both AMEF and the recapitalization of Mondadori, the ailing publishing empire.

AMEF’s partners included Carlo De Benedetti, who had been in contact with Mondadori as a shareholder of the Editoriale 1’Espresso group that founded the daily la Repubblica. De Benedetti held approximately 17% of AMEF. Silvio Berlusconi held 9%.

At Arnoldo Mondadori Editore, Mario Formenton was still president, and his nephew Leonardo Mondadori was promoted to vice president. As managing director, Franco Tató guided the restructuring of the company.

In 1985 profits rose to L25 billion, as opposed to the L10 billion of 1984; in 1986, profits tripled to L75 billion. When, in 1987, Mondadori reported profits of L100 billion, it was evident that the company was out of danger and that the rescue program, with the recapitalization from AMEF, had been a success.

It also proved that despite the losses of the Retequattro venture Mondadori was a basically healthy company. In 1987, however, Mario Formenton died prematurely. Former managing director and vice president Sergio Polillo was brought in to fill his place, after a bitter struggle over the succession that opposed Leonardo Mondadori to his aunt Cristina and her son Luca Formenton.

The loss of Mario Formenton triggered a series of events that eventually catapulted the company into national news. With the two branches of the family in conflict, the shareholder Carlo De Benedetti achieved a position of considerable influence. During this period, the skilled financier struck a deal with the Formenton family by which he retained right of first refusal if they ever decided to sell their shares.

Then, aligned with the Formentons at the Mondadori 1988 shareholders’ assembly, De Benedetti successfully exploited a technicality in the relationship between the publishing group and the AMEF holding company to emerge in a majority position. Together, the Formentons and De Benedetti voted to exclude the founder’s grandson from the board of Mondadori. Embittered, Leonardo left the family business to found his own publishing house, Leonardo Editore.

Under De Benedetti’s guidance, the Mondadori group continued to thrive. The group acquired a stake in Elemond, which controls the prestigious Einaudi publishing house. In April 1989, De Benedetti arranged an important agreement whereby la Repubblica shareholders Eugenio Scalfari and Carlo Caracciolo sold their 51.85% share in Editoriale L’Espresso to Mondadori for L407 billion. As part of the deal, Caracciolo was nominated president of Mondadori, and Scalfari became a member of the board of directors. With la Repubblica and Editoriale L’ Espresso added to its interests, Mondadori was now worth L2.3 trillion and was by far the largest publishing company in Italy.

Conflict developed again in 1989, the 100th anniversary of Arnoldo Mondadori’s birth. Silvio Berlusconi had acquired more shares of AMEF and sided with Leonardo Mondadori to wield majority power in the decision-making. Berlusconi’s interest in Mondadori emerged when he blocked a move by Carlo De Benedetti to merge his holding company Compagnie Industriali Riunite S.p.A. (CIR) and AMEF.

By December 1989, fearful of their loss of influence on the board of Mondadori, the Formentons struck a deal to sell their AMEF shares to Berlusconi, effectively reuniting with their cousin Leonardo Mondadori. The move immediately set off a furor in the financial world and in the media, where the contestants carried out a bruising and highly publicized battle for control.

On one side was Berlusconi, allied with the two families of Mondadori and in control of AMEF, and therefore of the ordinary capital of Mondadori. On the other side was Carlo De Benedetti, joined by the la Repubblica editors Scalfari and Caracciolo, with 51% of the privileged capital of Mondadori. By the end of the year, the contest was transformed into a complicated legal struggle that turned on the validity of De Benedetti’s agreement with the Formentons granting him first option on the Formenton’s shares, should they ever decide to sell.

For 156 days, Silvio Berlusconi claimed control of Mondadori. The 1989 annual report listed Berlusconi as president and Luca Formenton as vice president. The report described recent developments: a new division called “business and information” comprising business publishing and a computer software company, Mondadori Informatica; an agreement reached with Fortune for publication of an Italian edition; and the divestment of Mondadori’s papermaking activities. But the victory was short-lived.

The deal between Berlusconi and the Formentons was contested in the courts and, in June 1990, arbitrators ruled in favor of De Benedetti. Judges assigned Giacinto Spizzico, an 81-year-old business lawyer, to the post of president. The office of vice president is shared by Fedele Confaloniere, formerly managing director of Fininvest, and Luigi Vita Samory, a lawyer appointed by the courts. Two men also fill the post of managing director: Carlo Caracciolo, and the court-appointed Antonio Coppi, a former executive of the Rizzoli publishing house. The new general director is a former executive of Carlo De Benedetti’s CIR holding company, Corrado Passera.

In January 1991, this ruling was nullified in the Rome Court of Appeals without, however, significantly altering the balance of power between De Benedetti and Berlusconi. De Benedetti’s original agreement with the Formentons was found to be in violation of the AMEF charter. A negotiated settlement was reached in May 1991, whereby Berlusconi and the Mondadori-Formenton families retained control of Mondadori’s book and magazine publishing interests, and advertising agency. While De Benedetti controlled the Repubblica-Espresso group plus 15 local newspapers.

Events between 1989 and 1991 were traumatic for Mondadori. In spite of the contest for power already under way, 1988 was a strong year for the company, which reported a net profit of L103 billion. In 1989, this figure was reduced by half, partly owing to losses in the advertising activities.

Prospects for the future include plans for a close cooperation with the TV communication activities of Fininvest. The group is looking beyond its traditional pre-eminent role in Italy, toward changes taking place in the context of the unified European market. Mondadori has the skill and experience to anticipate what the public wants and the partnership with Silvio Berlusconi offers Mondadori an unparalleled chance to promote its books and magazines through television.

Principal Subsidiaries

Auguri di Mondadori S.r.l.; Artes Graficas Toledo S.A. (Spain); Club degli Editori S.p.A.; Editiones Grijalbo S.A. (Spain); Monadori Espuna S.A. (Spain); Mondadori Business Information S.p.A.; Mondadori Informatica S.p.A.; Mondadori Pubblicita S.p.A.; Mondadori Video S.p.A.; Verkerke Reproduletres N.V. (Netherlands).