Wednesday, 23 March 2011

Italians Scheme Resistance

The Financial Times reported on 22 March 2011 that politicians in Rome are seeking an “Italian industrial solution” to foreign takeovers (aka assimilation) especially in vital sectors such as energy, telecoms, technology, defence, and most importantly, food.

Unlike the Financial Times reporter who expressed the hope that this effort would fail (on behalf of the shareholders), I am delighted by the effort, and wish them the best of luck. However, if it is based on the French-style of thwarting unwanted foreign takeovers, I’m not sure how effective it will be considering last week’s 50% buyout of Yoplait by General Mills. (General Mills was in the news again on 23 March 2011 making record profits selling junk food snacks at higher prices in foreign markets.) Perhaps that was seen as a desirable takeover by the French government?

Italians do have a reputation in Europe of being proud of their food. Even exports such as parmesan cheese and durum wheat pasta are well-known for quality.

This recent news started with Lactalis, a French dairy company that has a dairy joint venture with Nestle SA, taking control of 29 per cent of Parmalat, one of the few Italian multinationals in the food industry. Parmalat generated about 4.3 billion euro in 2010 with its milk, dairy products and fruit beverages, but things haven't always been so rosy. It accounts for about 9 percent of Italian food production. And, interestingly enough, I noticed that Lactalis’s 1.4 billion- euro bid for all of Yoplait was rejected last year. Having been unsuccessful in its own country to expand, Lactalis went to Italy instead.

The Italian government is probably too late to protect this particular corporation because it has already jumped into global market competition. Once a company has reached this size and scale, it becomes prime bait for the larger, world players.

However, Industry Minister Paolo Romano told parliament the government was following the Parmalat case very closely and wanted to ensure that the entire chain of food production was kept in Italy. Further, according to Reuters, he said:

"For this reason, there have been meetings with the main operators in the sector with the aim of creating an alliance which would put financial and industrial participants together to create a national food grouping that would be in a position to compete on the global market".

If the Italians join the global market in the guise of a national alliance, they’ll be game for takeover as in the UK which is working in partnership with transnational corporations and in the US where such corporations often are the government.

It is further reported that Italy’s antitrust authority is investigating whether Lactalis’s control of Parmalat would violate competition rules. Considering the state of the global food market, I wouldn’t hold my breath for a result using European completion law.

The only solution is to keep food production and consumption local and any international trade in food on a small scale. But resistance of any sort is fertile, especially an anti-takeover decree, even if the company does have a shady past and products that I would not classify as real food.

Photo Credit: "Italy to defend companies from foreign buyouts" France 24.

Just hot off the press from the Financial Times (23 March 2011, 7:20pm):
Italy revs up drive against foreign takeovers
Italy has stepped up a campaign against French buy-outs of Italian companies, drawing up a bill aimed at thwarting unwanted foreign takeovers and opening a tax probe into two deals.