Italy's maverick faces toughest fight: Despite huge problems, Carlo De Benedetti is calm. Gail Counsell writes

CARLO De Benedetti looks surprisingly calm for a man whose corporate empire is in such difficult waters. Take Olivetti, his best-known operating company. For the last few years the Italian group has been fighting a losing battle with the powerful currents that have wreaked havoc in the global computer industry.

That tussle has just culminated in much worse than expected losses last year of 650bn lire ( pounds 280m) and a massive, deeply discounted rights issue. The market has responded by slashing the share price by more than 20 per cent in a fortnight.

He has other worries. Cerus, his French investment company, is losing money, in part due to disastrous property lending by a subsidiary. Valeo, his Franco-Italian car parts company, is shedding staff. The share prices of his quoted main holding companies, Compagnia Finanziaria de Benedetti (Cofide), and Compagnie Industriali Riunite (CIR), have been in dramatic decline since the end of the 1980s. And, of course, there is the delicate issue of a six-year prison sentence, currently in abeyance pending appeal, which he received last year for his involvement with Banco Ambrosiano.

Sensitive subjects all, yet the 59-year old Mr De Benedetti appears neither unduly troubled nor touchy about any of them. Rather the reverse. He is all too happy to discuss them in coherent detail and at some length. As both a puzzle-solver who enjoys finding rational solutions to serious corporate problems, and a risk-taker driven by entrepreneurial rather than conservative traditions, he rather likes expounding his theories and takes pleasure in disconcerting polite questioners with frank replies.

His anti-establishment tendencies are often remarked upon. He has neither fully accepted, nor been fully accepted by, Italy's ruling elite, and can be uncompromisingly dismissive when discussing the establishment, which he insists on calling the 'regime'.

He likes to recount how, on turning Olivetti around for the first time in 1979, he came to public attention and found himself summoned to an audience with Bettino Craxi, leader of the Socialist Party. 'Craxi said: 'I want to know if you are with me or against me.' I said: 'I am neither with you nor against you.' So it started as a very difficult relationship.' It continued like that, with Mr De Benedetti too successful to be entirely ignored by the establishment but too awkward to be assimilated by it.

'I was considered in my country to be a Communist because I said once that democracy wasn't democracy unless you have a possibility of change. In my country the Communists had a third of the vote so people concluded change meant change to the Communists,' he explains. 'Also I am the biggest shareholder in La Repubblica, which in Italy was considered left-wing and pro-Communist. So I was considered to be against the regime.'

But being neither with them nor against them has proven his undoing on several occasions, not least when he found himself inculpated in the Banco Ambrosiano scandal.

As the bank began to collapse it seems to have looked around for someone to give it credibility. Mr De Benedetti was picked by Roberto Calvi, the head of the bank who was later found hanged under Blackfriars Bridge in London, and invited to become deputy chairman, a decision Mr De Benedetti claims got Calvi into trouble. '(Calvi) told me: 'I did a big mistake asking you to join the bank, I didn't consult the politicians'.'

As a result, he says, he was frozen out of any power or influence at the collapsing bank. He lasted 65 days and publicly warned on resigning - and selling his stake - that the bank was in severe trouble, although it was months before the authorities reacted.

Nevertheless, his conviction for involvement in a 'fraudulent bankruptcy' stands and, while he hopes the 'white revolution' in the process of overthrowing Italy's suffocating political system will work to his benefit when his appeal is held, probably some time next year, he acknowledges that there is no guarantee it will be successful.

As for Olivetti, the spotlight is on its relationship with Digital Equipment Co, the US computer giant. Last summer, Digital paid CIR L172bn, or L8,500 a share, for just over 4 per cent of Olivetti - three times the ruling market price. The conclusion was that Digital was prepared to pay a premium to get a European partner.

The agreement envisaged Digital raising its stake to about 10 per cent by the end of next year, mostly through further purchases from CIR at L8,500 a share. That compares with the L1,000 price of the surprise rights issue and a market price of about L1,800. CIR, which will take up its rights but intends to cut its overall stake in due course, will make a profit.

Digital, which has already increased its stake to about 5 per cent, is saying nothing publicly about how it feels about the cash call, except that its agreement to make additional purchases is conditional on milestones being reached for sales of its products and that its lawyers are carefully examining the documents and it will respond in due course.

That reaction will be a key test of its commitment to Olivetti and its faith in Mr De Benedetti, who regained day-to- day control in 1991 and is now inextricably associated with its new strategy.

It is also a personal test. Mr De Benedetti's reputation as an astute operator rests on several successful corporate re-organisations, especially the original revamping of Olivetti and Valeo.

Admittedly he was always quick to spot the opportunities offered by stock markets. Asked in 1972 by his father why he was taking the family company to the stock market since it was free of debt, he recalls responding with a creditable lack of sentimentality: 'Families are finished. If you want to grow big the cash flow of a family company is not enough.'

But his real talent lay in understanding how businesses could be restructured and made profitable. It was first spotted by the Agnellis, Italy's Fiat-owning uncrowned royal family. As a child, Mr De Benedetti shared a Turin classroom with Umberto, younger brother of the patriarch, Giovanni Agnelli. The association ended when the Nazis invaded and the Jewish De Benedettis had to flee, leaving the Catholic Agnellis behind.

After his return he spent many years running the family metal tubing business.

Giovanni Agnelli then suggested he come and help run the car company. It was an enormously flattering proposal, but illusory; Mr De Benedetti, who quit within three months, readily agrees he made a tremendous mistake. It certainly won him no friends at the all-powerful Fiat.

Mr De Benedetti had ensured that, before joining, the Agnellis bought him out of his own company in exchange for 6 per cent of Fiat. 'I thought being a large shareholder of Fiat meant I could behave as I did in all my life - to be boss. In fact you can have as many shares as you like, but Agnelli is Fiat.'

Liquidating the Fiat stake enabled Mr De Benedetti to buy control of CIR and through it Olivetti. Yet, his success with Olivetti notwithstanding, his prickly relationship with the Italian establishment frustrated many of his later ambitions and forced him to look for a wider stage. It proved his undoing.

In the mid-1980s he turned his attention to the rest of Europe and switched from being a hands-on entrepreneur into an active investor and corporate raider. He moved first to France, gaining control of Cerus.

Initially, things went well. In an operation reminiscent of the successful turnaround of Olivetti on which he built his reputation in 1978, Valeo, a Cerus subsidiary, was successfully refashioned. Spain and Portugal joined his empire.

His technique was to identify a company in need of restructuring, buy a minority stake and achieve control with the aid of like-minded shareholders. Then he would revamp the group, float it and/or re-invigorate its share price, and use the cash to buy into something else.

But in 1988 he overreached himself with a bid for control of Societe Generale de Belgique, Belgium's largest holding company, through Cerus. He woefully underestimated the political opposition he would meet and was left a powerless minority shareholder. Not for the first time he had been thwarted by old forces of Europe. It cost more than dollars 240m.

Since then he has returned to his roots, declaring that the days of financial engineering were over - exit the stock market player of 1980s, enter the industrialist of the 1990s.

Yet his first escapade on home territory was to lead him smack bang into the establishment wall again. By the end of 1989 he was in a battle with Silvio Berlusconi, the Italian media mogul, over the ailing Mondadori combine, Italy's largest publishing group.

Amid much muttering about political pressure, switching of shareholder alliances and lawsuits, Mr De Benedetti was robbed of control of the group by Mr Berlusconi and his supporters. In the end the empire was split. Mr Berlusconi got the books and magazines and Mr De Benedetti the Espresso group, which included its newspapers. Among them was La Repubblica, which has an 18 per cent stake in Newspaper Publishing, publisher of the Independent.

That was two years ago. While he still talks of his determination to rein in his empire - there are persistent rumours that he is planning to sell his interest in Cofir, his Spanish holding company - progress has been limited.

He continues to invest in a bewildering variety of companies, often via complex 'syndicate' arrangements with other minority shareholders that give him control. But the days when his quoted companies' shares commanded high premiums have gone.

Whatever happens with Ambrosiano, the jury remains out on Mr De Benedetti. If he succeeds in turning around Olivetti he could become one of the very few 1980s financiers who adapted to the new order of the 1990s. The odds are against him, but then that is probably how he prefers it.

(Photographs omitted)