Members of the Tabacchi family have reached a new consensus on their respective shareholdings in Fimit, the holding company that controls 60 percent of Safilo. Consequently, Safilo's board of directors has reconfirmed Vittorio Tabacchi as president of the Italian company. Vittorio had resigned from the top post in mid-May to break up the holding company and regain the freedom to dispose of his own shares, blocked by an equity pact signed at the beginning of 1999 with his brothers Giuliano and Dino, of which we have obtained some elements.

The new consensus paves the way for a smooth generational passage by bringing in the children of Vittorio, Massimiliano and Samantha, thus diluting the dominant shareholding of their father, but it confirms other aspects of the Tabacchi family's equity pact. The pact, which expires at the end of 2001, gives to Fimit's shareholders a right of first refusal on each other's shareholdings, but it gives them a certain freedom of maneuver each year for up to 1.9 percent of Safilo's equity. Any party to the pact may call for the break-up of the family holding company at certain conditions.

The families of the three sons of Guglielmo Tabacchi, the founder of Safilo whose birth is being celebrated this year, have been holding their shares in Fimit lately through three firms. Giuliano Tabacchi and his two children, Antonella and Guglielmo, held 25.7 percent through a company called Gamba. Vittorio and his wife Tatiana Amboni held 41.2 percent through a company called Venere. The balance of 33 percent was held by Dinocle, a company owned by Dino Tabacchi and his wife Clelia Sabella. In addition, the three firms and Vittorio Tabacchi personally held a certain number of convertible shares, corresponding more or less to their respective holdings.

Venere was thus the largest shareholder in Fimit. Last May 12, Vittorio and his wife decided to break up Venere and to transfer its equity to 4 new firms, each held by one person, while maintaining the equity pact with Gambi and Dinocle. Vittorio, who is 60 years old, now owns only 17.4 percent of Fimit through a new company called Progetto 60. His wife has an equal shareholding through her own company, Progetto 55. Massimiliano and Samantha each own 3.2 percent of Fimit through Progetto 30 and Progetto 25, respectively.

The reorganization of Fimit's equity apparently coincided with a dispute among the three brothers, which they have officialy denied, on the possible entry of a major new shareholder. Vittorio would have reportedly preferred the Gucci fashion house. His brothers would have preferred Luxottica. In the end, Safilo's relatively high share price may have prevented a deal. It's reasonable to believe that the three brothers may have reached a compromise until the expiration of their equity pact in 18 months' time.

The latest takeover rumors accompanied a 6.03 percent increase in Safilo's share price last July 25 to almost 10 euros. Reports indicated that Vittorio had secured the shareholding of his brother Giuliano for 500 billion lire (e260m-$240m), giving him the obligation to launch a tender offer for all other direct and indirect shareholdings in Safilo. Safilo denied the rumor, stressing that the planned share transfers within Fimit concerned a minority shareholder and that they didn't involve such an obligation. After the July 31 peace announcement and the news about Vittorio Tabacchi's re-election, which should have been celebrated in mid-June, Safilo's stock price declined by 2.7 percent to e9.38, indicating a certain frustration by investors who had bet on the entry of a new shareholder, in spite of the concomitant announcement of brilliant results for the company in the first half of 2000.

The net profit for the period shows a 61 percent increase to 50.6 billion lire (e26.1m-$23.9m), moving up from 6.2 to 7.43 percent of revenues. Sales are up 34.5 percent to 680.9 billion lire (e351.7m-$321.1m). The gross profit has increased by 38.4 percent to 402.5 billion lire (e207.9m-$189.8m), or 59.1 percent of sales. The operating income has risen by 51.6 percent to 16 percent of sales.

Safilo's eyewear deliveries grew to 9.9 million pairs from 8.5 million pairs in the year-ago period, with strong increases in all markets. Revenues increased by 41.2 percent in Italy, where Safilo sells 17 percent of its production, thanks to higher sales in the optical circuit and to the consolidation of New Sportech, distributor of Smith and other sports brands.

Sales in other parts of Europe grew by 24 percent, with particularly strong performances in France, Germany and Spain. North America remains the company's largest market with 44 percent of deliveries, but sales in that market rose by only 31.8 percent in lire and by 18.8 percent in dollars. In the Far East, where Safilo now has a stronger presence, and in other markets sales were up 58 percent. Safilo acquired the distribution in Portugal in March and in South Africa in May.

In line with the increased demand for Safilo's products, the company's staff increased by 428 persons to a total of 4,972 in the first 6 months of the year, including 327 production workers and 101 employees in the distribution apparatus. Out of the nearly 3,000 employees in Italy, 388 had only temporary contracts. Communication expenses increased in absolute terms to 58.2 billion lire (e30.1m-$27.4m), of which one-sixth was allocated to the sports sector, but they declined as a percentage of sales to 8.6 percent from 9.2 percent in the comparable 1999 period.