Safilo's management crisis is far from over. Vittorio Tabacchi, the 60-yearV-old executive who became chairman of the family-owned group 7 years ago, announced his resignation last May 16, just 4 days after the formal approval of the company's brilliant results for 1999 and for the the first quarter of 2000. Six weeks earlier, after the group's share price shot up, the Tabacchi family had denied rumors that the group was to be sold to Luxottica or De Rigo.

Coinciding with the celebration of the 100th anniversary of the birth of the company' founder, the late Guglielmo Tabacchi, a board meeting scheduled for May 26 was supposed to appoint a new chairman, but it has now been postponed to mid-June. Meanwhile, the group's management is handled by Giannino Lorenzon, the group's chief executive officer.

The three Tabacchi brothers - Vittorio, deputy chairman Giuliano and vice chairman Dino - are joint owners of Fimit, the holding company that owns 59.95 percent of Safilo. Mediobanca, Italy's most influential merchant bank, recently paid 45 billion lire (e23m-$22m) to double its stake, from 2.07 to 5,082 percent. Euromobiliare Asset Management holds a 2.014 percent interest, and the remaining 33.056 percent is trading on the Milan stock exchange. Mediobanca's move, which took place just before the opening of the MIDO show in Milan, was interpreted as an attempt to dissuade Luxottica from its alleged takeover intentions with regard to its competitor.

In spite of repeated denials, analysts attribute the apparent dispute among the three brothers to a desire by Giuliano and Dino to sell their stakes in Safilo to Luxottica, each pocketing 300 billion lire (e155m-$143m) or more in the process, while Vittorio would like the family's stake to go to the acquisitive Gucci fashion house, whose brand accounts for 20 percent of Safilo's turnover. As in the case of Giorgio Armani and Luxottica (see following story), Dolce & Gabbana's 5 percent stake in Marcolin and the joint venture between Prada and De Rigo, the latter scenario would see another major Italian fashion house take a direct share in the equity of a major eyewear firm. A possible complication in a merger between Luxottica and Safilo would be the fact that the two giants, which would have a combined turnover of 4,600 billion lire (e2,400m-$2,200m), would reach market shares that may be criticized by the anti-trust authorities of certain countries.

The press release announcing the chairman's resignation stressed that ?the members of the Tabacchi family refute the rumors claiming that negotiations are underway to sell Safilo Spa to third parties,? and that the group intended ?to proceed with its current strategy.? In a statement published through a press agency, Dino Tabacchi was particularly emphatic about the absence of any negotiations. He linked the rumors concerning the sale of Safilo to the sort of stock exchange speculation that has accompanied recent spurts in the stock's price.

Safilo's stock price has increased by over 30 percent since the beginning of the year, with peaks of up to 40 percent. The price has settled at around 10.15 euros, as compared to e8 in January, since the publication of the group's 1999 results, which showed a 55 percent increase in net profit on 17 percent higher turnover at 987 billion lire (e510m-$473m).

The company's results for the first quarter of 2000 were brilliant as well, with turnover up 32 percent to 332 billion lire (e171m-$159m), although 7 percentage points were attributable to the weak euro.


The average price is up as volumes increased by only 16.3 percent to 5 million pairs, including 400,000 pairs of sports glasses. Revenues increased by 35.9 percent in Italy, by 22.6 percent in the rest of Europe, by 31 percent in North America and by 68.1 percent in the rest of the world, thanks in part to the new Japanese subsidiary and the economic recovery in Asia. The gross margin dropped slightly to 33.5 percent of sales, due to a stronger recourse to subcontractors. Operating and net earnings for the period both grew at the same 44 percent rate from the year-ago period. However, at 6.6 percent of sales, Safilo's net profit margin is still below that of the industry's leader, Luxottica.

Meanwhile, Safilo has acquired for 540 million lire (e280m-$260m) the 70 percent stake it did not yet own in Maxima, a company in Longarone that specializes in the galvanizaion of eyewear frames, in the framework of the new European limitations on the use of nickel. The company employs about 80 people.