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Leonardo: how will the Italian Government take sides in the assembly against Profumo?

The domain of appointments starts from the company

Tomorrow, on Wednesday May 19 could become a historic date for Leonardo. The shareholders' meeting gathers and there are already those who speak of "high noon". Guns aimed at Alessandro Profumo: by now there are not a few who would see him well out of the chair as CEO. The more time passes, the longer the list gets. The first at the top of the list is the investor Bluebell, Giuseppe Bivona who asked that the liability action he himself promoted be voted on during the meeting. Liability action against the group's Chief Executive Officer, Profumo, convicted at first instance by the Court of Milan in the MPS case for manipulation and false corporate communications in relation to the bank's first half-year 2015. Bluebell, which owns 25 shares in the defense group, in a letter to Leonardo's President, Luciano Carta, dated April 28, stated that he wanted to bring the action and seek compensation for damages resulting from the conviction.

Today, to support Bluebell, the proxy advisor Glass Lewis arrived, inviting Leonardo shareholders to vote in favor of the liability action brought against the CEO by Bluebell Partners, who complains of reputational damage from the conviction of the ex-president of MPS. "The first instance ruling against Alessandro Profumo is indicative of reasonable grounds for a liability action", says Glass Lewis, one of the major advisers to institutional investors in the meetings of listed companies, in his voting recommendation ahead of the shareholders' meeting of Leonardo shareholders on May 19. The manager, we recall, has filed an appeal but it does not seem to matter that much: the investors are afraid that, in the meantime, the company, formerly of Finmeccanica, once the flagship of Italian manufacturing, will be impoverished to this extent. point to risk bankruptcy. The fear is palpable on the Stock Market: today the title has lost almost 1% (-0.92%), closing at € 6.89 and losing a capitalization of 4.01 billion, while the Ftse Mib closed up by 0, 39%.

Glass Lewis wrote that "Mr Profumo's conviction for events that occurred during his office as president of Banca Monte dei Paschi di Siena had a strong negative impact on Leonardo's reputation. Although the sentence is subject to appeal, we believe it serves as a substantial indication that Mr Profumo's actions could produce a loss in value for the shareholders and that a liability action can be justified". For shareholders who have the opportunity to cast an electronic vote on this proposal, Glass Lewis adds, "we recommend supporting this initiative which authorizes legal action but does not bind the voter to participate directly in any joint claim".

But the list of those opposed to Profumo is still longer, we said. Frontis also opposed the CEO, who suggested voting in favor of the activist fund's proposal. More and more. According to "Milano Finanza" newspaper, Alken Asset Management, a company based in London and specializing in investments in European equities (it manages Alken European Opportunities), has issued a statement in which it explains "that it is surprised that the board of Leonardo does not request the Mr Profumo's resignation from the role of CEO" and who considers the title "not investable if Profumo remains in office". Clear isn't it?

The strongest lunge, however, comes by Bluebell. Which goes so far as to ask that Profumo "resign" at Leonardo's on May 19 assembly after proxy advisors Glass Lewis and Frontis suggested that the shareholders vote in favor of the liability action proposed by the activist fund against the CEO of the defense and aerospace group. In a letter, Bluebell, or rather his patron Bivona, asks the Government to postpone the meeting for five days, so as to allow the shareholders "to update the explanations of vote" and the Government itself to vote with its 30.2% in favor of the liability action. Glass Lewis' assessment, according to Bluebell, represents "a heavy judgment of mistrust" of Profumo. "The CEO of Leonardo -Bivona states it- is entitled to the presumption of innocence up to the final judgment. But a CEO who does not resign after being sentenced in the first instance for false accounting and information manipulation and who is called to answer also of other financial crimes in other proceedings, exposes the company to reputational damage". And that's not all. Bluebell complains that its liability action request, presented on April 28, was published late by Leonardo, thus preventing shareholders and proxy advisors from examining it in time for the meeting.

In short, it is clear that Wednesday will be more than an assembly, a showdown. The Italian State, Leonardo's shareholder with 30.2% of the capital, in the "belly" of the Ministry of Economy and Finance, will be called (finally) to deliberate on the motion against Profumo: if the latter is approved by shareholders representing at least 20% of the capital, writes Bivona, founder of Bluebell Partners, to Prime Minister Mario Draghi, "the CEO would immediately lapse in accordance with the law pursuant to article 2393 of the civil code". In short, there are more and more those who hope that Wednesday is the conclusion of this (bad) soap opera that has been dragging on for too long. Profumo innocent or guilty (the Court will attest it) more and more are those who wonder why no one is intervening on the question Leonardo. Okay, now Profumo can count on the support by the new Minister for Ecological Transition, Roberto Cingolani, ex-IIT, Italian Institute of Technology in Genoa, in whose foundation Profumo still sits. But why do you never hear the voice by Luciano Carta, President of Leonardo? Why has Minister Daniele Franco not yet decided to take a firm position? Who, on the other hand, has no doubts, is the market: just go and see the title. Since Profumo took over the company in 2017, Leonardo's shares have gone lower and lower, losing more than 50% of their value and going from over 15 Euros four years ago to the current 6.8 Euros.

Now the question has crossed national borders. Bivona wrote to the British Defense Ministry, updating it on Wednesday's assembly. In fact, Leonardo is a partner of important British companies such as Bae Systems, Rolls Royce and Mbda UK in the Tempest program. With these companies it shares "knowledge, product definition and technological development" for the joint development of future combat aircraft systems, including on systems such as Typhoon and F-35, as well as on Tempest, the next generation combat aircraft system launched in United Kingdom, where the Italian group employs 7,000 people. It is a bad story, this of Leonardo and Profumo, which risks throwing a jewel company in the country into disarray. If the soap opera continues, without any change between the protagonists, as repeatedly wished by M5S (Cinquestelle) and Lega, for example, the figure that Italy will make could be difficult to recover in the future. Because now it is no longer just an Italian question, but an affair that jeopardizes the credibility of the many competent managers who lead as many Italian companies.

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AVIONEWS - World Aeronautical Press Agency