Montedison SpA

Foro Bonaparte 31
Milan 20121
Italy
(02) 63331

Public Company
Incorporated: July 1, 1966 as Montecatini Edison S.p.A.
Employees: 70,104
Sales: L11.638 trillion (US$ 8.608 billion)
Market Value: L6.534 trillion (US$ 4.833 billion)
Stock Index: Rome Florence Milan Amsterdam Brussel Geneva

Montedison was formed on 7 July 1966 on the merger of Montecatini and Edison. Edison had been an electric power utility company that had moved into chemicals, while Montecatini had been a chemical company buying and building power plants. The two had had intertwined histories for years, at times with the same man on both boards co-ordinating their growth, at other times with nothing in common but rivalry.

Edison had been formed as a power utility in 1884 in Milan. Like nearly all the early electrical companies, it grew quickly and steadily. The long strikes by workers in 1913 and the two World Wars barely effected its fortunes. In the 1930’s, while the rest of the world was in a depression, Edison began to diversify widely and, in the 1950’s, began its acquisition of petrochemical companies. By 1960, Edison was Italy’s second largest chemical concern.

Montecatini was formed in 1888 as a pyrite mining business in Tuscany. It was run by the Donegani family, in particular by Guido Donegani, who was made director in 1910. Born in Livorno in 1877, he had studied industrial engineering, and was utterly a man of his time. He served in Parliament in 1921, was vice president of the Banca Commerciale Italiana at the peak of his business career, and soon became the president of his profession’s fascist organisation.

Within ten years of taking over as Montecatini’s director, Donegani had begun to build the small mining company into a much larger enterprise. While he had some domestic backing from the Banca Commerciale and the credito Italiano, it was mainly through the heavy funding from four Parisian financial and industrial backers that he was able to involve Montecatini in the production of phosphates, fertilizers, and sulphuric acid. The development of all of Italy’s chemical industry at the time depended not only on French financing and sales agreements, but on the colonial ventures in phosphate mining in French Tunisia. Montecatini had one of the main mining contracts there, and built much of its later strength on this early cooperation with the French. At the same time, the Banca Commerciale was investing heavily in public utilities, especially the electric ones like Edison. One of the bank’s managers, Guiseppe Toeplitz, worked closely with the Donegani brothers to arrange Montecatini’s monopolization of the fertilizer and sulphates production in Italy. With the Banca Commerciale and Donegani directing the growth of both companies, there was no real competition between them, but the ground was obviously prepared for it to begin whenever the leadership of the companies would be different.

After World War I a second phase of growth began for Montecatini. It branched out into aluminum, purchasing its own sulpher phosphate factories, and gradually took over the country’s explosives industry. It built the first synthetic ammonia plant in Italy, and then added marble works. Even so, it was a small company by international standards, its 1928 capital being a little over the equivalent of £1 million.

World War II was more drastic, and reduced the company’s installations by a third. Reconstruction led to some managerial changes: in 1945, Guido Donegani had been arrested as a collaborator but, like so many, was freed almost immediately, for “negative evidence.” His release caused Montecatini’s workers to strike in protest. Though he remained free, he disappeared and, in April 1947, died of heart disease.

By 1948, Montecatini had managed to regain its former size, with 57,000 workers, 110,000 shareholders, and a working capital of 18 million lire. It was mining or producing sulpher, bauxite, marble and granite, lead, zinc, and aluminum. The chemical production had expanded from fertilizers to insecticides, pharmaceuticals, and man-made fibres. The company’s own electrical production was 1 billion 300 million kilowatts, from its eight hydro-electrical and one thermoelectrical plants. New ventures included rope making, packaging, and investment in research. It built Europe’s first petrochemical plant, at Ferrara. In one of its research facilities, Professor Giulio Natta created the process for manufacturing isotactic polypropylene, of major importance in the production of thermoplastics. (For this work, he was awarded the Nobel Prize in chemistry in 1963.)

By this time, the company had overextended itself. Royal Dutch Shell became a large investor in Montecatini’s petrochemical business, while preparation also had to be made for what seemed to be the inevitable nationalisation. The 1966 merger with Edison was partly a result of the difficulties brought to Montecatini by overextending and to Edison by nationalisation. Before the merger, Edison had lost its electrical generating interest to nationalisation, and was having trouble getting paid for it. Edison’s president, Giorgio Valerio, began negotiating the merger of the two companies, which would compensate for Edison’s great losses, in such complete secrecy that even Montecatini’s president, Carlo Faina, knew nothing about it. When he was ultimately presented with the finalised merger terms, it was something of a fait accompli, though he did try to turn the tables and suggest that Montecatini take over Edison instead. The battle was loud but ineffectual, and the result, Montedison, was a huge conglomerate centred on chemicals and electricity.

Two years later, the Ente Nazionale Idrocarburi (ENI) acquired an interest in Montedison which, combined with that of Istituto per la Riconstruzione Industriale (IRI) gave the state 18.4% of the company. Small shareholders were outraged, claiming the move was “surreptitious nationalisation.” In the riotous annual meeting of 1969, they stood up, shouted, and threw coins and copies of the annual report at the chair. Despite the noise, the state retained its shares.

The 1970’s brought a disastrous period when the company, under Eugenio Cefis, fell to undeclared bankruptcy. While chairman of Montedison, Cefis was called the most powerful man in Italy, but he had studied at the Modena military academy and seemed to have a greater understanding of politics than of industry. As chairman, he operated from within a personal and highly political clique. At the same time, the government thought that the company could come in handy for a massive job creation scheme in the south of the country, and set up businesses through it which had no hope of making a profit. While the government supported the company’s debts, Cefis overextended into numerous other industries, and continued to play political games. In 1974 there was a scandal over his receipt of daily reports from military counter-intelligence on politicians and industrialists, among them the Prime Minister. By then, Montedison’s losses were averaging 100,000 million lire per year, but Cefis did not resign for another three years. He was followed by another man not up to the job, a former minister of agriculture, Giuseppi Medici, who resigned in 1980.

The hero of Montedison’s survival is Mario Schimberni, who became chairman in April 1980. Originally a lecturer in industrial technology, he moved into industry and worked his way up the managerial ranks of Montefibre and Montedison. As soon as he took over the latter, he fired seven senior managers and nearly 100 middle managers, in some cases replacing them with younger people having a more internationalist view of business. When ENI sold its shares in 1981, they were bought by Gemina, putting more of Italy’s traditionally powerful businessmen among the shareholders, and giving Schimberni a group of people with whom he could work to manipulate the shareholders’ decisions about the company. In a major rationalisation program, activities in subsidiaries, particularly Montefibre, were cut back. Montedison’s 200 or more companies were then divided into groups based on what they produced, and the workforce was cut from 149,000 to 69,000. Even though Montedison was short on cash, Schimberni used his considerable skill to acquire controlling interest in other corporations whose assets helped to lower the company’s debts significantly and to raise the cash flow to over 1,200 billion lire.

The result of Schimberni’s brilliant nursing of the company back to health has been that it was heartily pursued by another. Italy’s huge agri-industrial group, Ferruzzi, bought 40% of Montedison’s chemical concerns by early 1987. It cost Ferruzzi over $1.7 billion to become the single controlling shareholder of a company whose dividends still yield less than Italy’s treasury bonds, but the purpose seems to be to build Ferruzzi into the world’s third largest agri-industrial group, after Unilever and Nestle. Mr. Gardini of Ferruzzi and Schimberni seem to have big plans of working together on exciting new projects, many of them in developing countries, but until Ferruzzi gains a full 51% of Montedison, these plans are dependent upon goodwill and co-operation. Certainly, this public boost of Montedison’s desirability could increase its strength in the future.

Principal Subsidiaries

ACNA Chimica Organica SpA; Cledia Srl (99.9%); CUAI SpA (74%); Esercizio Raccardi Ferraviari di Porto Marghera SpA (60.4%); Ferroleghe SpA; Fertimont SpA; Fidenza Vetraria SpA (58.5%); Farmoplant SpA; Iniziativa ME.T.A. SpA; Istituto G. Donegani SpA (93.2%); Immobiliare Lido Di Spina Sas; Mira Lanza SpA (38.2%); Mondedipe SpA (99.9%); Mondedison International Holding Co. (Switzerland); Mondefibre SpA (70%); R.O.L. SpA (51%); Ausimont SpA (85.5%); Sade Finanziaria SpA (65%); SE FI MONT SpA; SEGEM SpA (80%); S.I.F.I. SpA; S.I.M.E. SpA; Simmont SpA (99.9%); Società Editrice II Messaggero SpA; Sviluppo Linate SpA; Vinavil SpA (55%); Vitrofil SpA (99%); Montepolimeri Belgio S.A. Feluy; Neder-mont B.V.; Distribuzione Fibre SpA (70%); Industria Tessile De Vercelli SpA (70%); Pettinatura De Ivrea SpA (70%); Sicrem-Società Industriale Cremonese SpA Pizzi-ghettone (CR) (35%); S.I.P.A.-Società Italiana Prodotti Acrilici SpA (70%); Società Italiana Poliestere SpA (NA) (70%); ARCA SpA (51%); A.TE.CA. SrL; Ausind SpA; LARAC SpA (95.2%); Dutral SpA (85.5%); Montefluos SpA (85.5%); Farmitalia Carlo Erba SpA (55%); Lark SpA (72%); OTE Biomedica SpA (55%); Vetem SpA (55%); Vega Oil SpA (95.5%); Alba Imballaggi Sud SpA; Commerciale Mira Lanza SpA (56%); Società Approvvigionamenti Industrian’ SpA; Vedril SpA; Venuti SpA (56%); C.A.F.-Compagnia Amministratrice Fiduciaria Srl (53.3%); CAGISA-Compagnia di Amministrazioni e Gestioni Immobiliare SpA (53.3%); DATAMONT SpA (53.3%); EUROMERCATO SpA (37%); Fiduciaria Valore SpA (53.3%); Finanziaria Milanese SpA (53.3%); Finanziaria Valori SpA (53.3%); MA.Part SpA (53.3%); MA.PA. Le Sri (53.3%); Montedil SpA (53.3%); Montedison Servizi Agricoltura SpA (53.3%); S.I.S.IM. SpA (53.3%); Teonimont SpA (53.3%). The company also lists subsidiaries in the following countries: Australia, Belgium, Brazil, Canada, France, Greece, Hong Kong, Indonesia, Japan, Mexico, Netherlands, Netherlands Antilles, Panama, Peru, South Africa, Spain, Sweden, Switzerland, United Kingdom, United States, Venezuela, and West Germany.