Benettons looks past travel chaos at Dufry deal

The meal deal offered by Benettons to small investors in Autogrill SpA arrived cold.

The billionaire family has just agreed to sell its controlling stake in the motorway restaurant operator to Swiss duty-free retailer Dufry AG in a not-so-generous deal, gaining a position of influence in the combined business. This leaves other shareholders deprived of the takeover at a price they clearly expected.

In January, Benetton’s holding company Edizione SpA was restructured to focus on three core areas – the fashion empire of the same name, Autogrill, and the infrastructure business Atlantia SpA in which it holds a minority stake.

Since then the family has been busy defending these positions. When construction magnate Florentino Perez made an approach to buy Atlantia, Edizione teamed up with American buying firm Blackstone Inc. to make its bid for complete control.

In the deal with Dufry, Edizione will sell 50% of its shares in Autogrill in exchange for a 20%-25% stake in the Swiss company. The logic is pretty clear: diversification and exposure to a larger food and retail travel market. It is clear that Edizione does not want to take money. The stock exchange is at the three-month average of the two companies’ share prices just before Bloomberg News disclosed the deal talks in mid-April.

It is in line with what appears to be a strategy to reduce the concentration of Benettons assets in Italy and pursue opportunities in businesses they are familiar with, while being more open to partnerships down the road.

The family receives a compensation for handing over control, judging by the proposed governance. It will be the main shareholder and will be able to appoint three of the 11 board seats. The current head of Autogrill will lead Dufry’s North American business.

There are shades here of the late Leonardo Del Vecchio’s move to merge designer eyewear maker Luxottica with Essilor in 2017. The luxury billionaire moved from a controlling position at Luxottica to a large minority stake in the enlarged company, but retained the influence of boardroom. The Benettons will face several powerful shareholders in Dufry – e-commerce giant Alibaba Group Holding Ltd., buyout firm Advent International, Qatar Investment Authority and luxury group Richemont.

For other Autogrill shareholders, a clean buyout at a good price would have been preferred, so the stock fell on Monday in disappointment. However, they are offered a slightly better deal than Benettons financially as they get a cash alternative at €6.33 ($6.37) per share (three-month average price). This is a valuable option, as the fall in Dufry’s shares since April means the value of the share-based offer is lower.

Why would Autogrill shareholders be tempted to trade in combination? There are some modest cost savings, but Dufry-Autogrill’s growth story should be taken with a grain of salt. Cross-selling of food and non-food products at airports is a challenge. A panini with your Gucci watch, lady? Customers are either focused on the task at hand – walking to the gate – or glued to their smartphones. That said, the experience of going through airports is anything but pleasant, creating a business opportunity for those who can improve it.

This two-phase deal will take nearly a year to complete, and its attractions may look very different then. Benettons will take a long-term view. But Autogrill’s other shareholders will focus on the support it gives their shares in the short term, as travel and the businesses it feeds are still far from returning to normal.

More from Bloomberg Opinion:

• The World Through Del Vecchio’s Ray-Bans: Rachel Sanderson

• Airline chaos makes high fares harder to afford: Brooke Sutherland

• Kellogg is serving hungry investors a snack: Andrea Felsted

This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist who covers deals. Previously, he worked for Reuters Breakingviews, the Financial Times and the Independent newspaper.

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