Parmalat’s future in the balance again

Since being appointed by the Italian government to the helm of Parmalat in late 2003, in the wake of a huge financial scandal, Enrico Bondi has been working steadily to navigate the company out of the crisis, while maintaining production and preserving employment. Over the intervening seven years, Bondi, first as Extraordinary Commissioner of the company under bankruptcy protection and as of 2005, as the CEO of the new Parmalat, has restructured the company, sold off subsidiaries and has turned the EUR 14 billion hole in Parmalat’s accounts into a EUR 1.4 billion pile of cash thanks largely due to his success in clawing back funds from investment banks linked to the fraud case.

Shareholders, however, have been criticizing the CEO for holding onto this pile of cash rather than sharing it in the form of increased dividends and/or share buybacks. In February 2010, he rejected the demands of institutional shareholders, saying cash would be used for acquisitions.

But little has come of that besides an acquisition in Australia and some investments in Canada and South Africa. In February of this year, disgruntled private equity funds started making plans to elect a “highly-qualified board” at the next shareholders meeting, which does not include Enrico Bondi.

The Italian trade unions have been voicing concerns as well over the lack of a perspective for growth, linked to the absence of a clear business plan targeting acquisitions and investments in technological and product innovation. In the past months, and with growing urgency, FAI-FLAI-UILA have been demanding that Parmalat and the government abandon their dangerous immobility and meet to discuss future prospects within the framework of a strategic approach to the dairy sector in Italy.

Enter Lactalis, the France-based privately-owned dairy company, which has recently made significant acquisitions in Spain. Already present in Italy through its ownership of Galbani, the company acquired an 11.4% stake in Parmalat in mid-March. Lactalis was clear about its intentions to use Parmalat as a platform for growth in terms of geographic and product range – and clear about its intentions not to bid for the entire company. However, a few days later, the three private equity shareholders which had previously been preparing the ground for a board shake-up, bailed out and sold their shares to Lactalis, bringing that company’s shareholding to 29%. Lactalis is now Parmalat’s biggest shareholder.

In the wake of Lactalis’ investment, the Italian government began considering measures to protect domestic companies from foreign takeovers and has now passed a law (dubbed the “save Parmalat” law) that allows companies to postpone their AGMs by up to 180 days after their annual financial reports are published. Parmalat’s AGM was due to take place on 14 April. The postponement until June will give Italian politicians, businesses (the confectionery company Ferrero and the dairy company Granarolo have expressed interest in being part of an Italian solution to the issue of Parmalat’s future) and the company’s management more time to consider their options.

But while analysts speculate over the synergies to be delivered through a Lactalis-Parmalat alliance (“Parmalat has twice as many factories as it needs”) and the Italian government is fretting over how to keep Parmalat in Italian hands (but without a strategic industrial approach), not one word has been said about Parmalat’s workers, particularly the 2,200 workers in Italy, where the major battle for the company’s future ownership is being carried out. Workers who, in the 7 years since the financial collapse, have played a crucial part in ensuring Parmalat’s survival. Workers who will be called on once again to demonstrate their extraordinary sense of responsibility. Workers who, together with their unions, are expecting and demanding the same sense of responsibility from the government and from Parmalat management.