- Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
- Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
If there is someone who just copy and paste the questions/answers of others, please whistle blow letting me know by email
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ReplyDeleteIs Campari Business group a single azienda?
ReplyDeleteCampari Group is a major player in the global beverage sector. Analysing the legal entity map and taking into account that the group operates in a single sector, we assume that the activities carried out by the group are so integrated with each other (because of their related businesses) that the subsidiaries cannot be qualified as aziende, hence Campari business group is a single azienda.
Who is the ultimate controlling party of Campari Group?
ReplyDeleteDavide Campari-Milano S.p.A. is controlled by Alicros S.p.A which owns 51 % of share capital. Garavoglia’s family wholly owns ALICROS Spa, a family holding company. Therefore the ultimate controlling party is Garavoglia family, more specifically Rosa Anna Magno Garavoglia.
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ReplyDeleteUsing the agency theory how should be composed the board of directors of the listed holding Davide Campari?
ReplyDeleteDavide Campari has family-concentrated ownership and the final controlling rights are in the hand of Garavoglia family. In this case an hostile takeover is not possible since the company is de jure controlled by Garavoglia family who owns, through Alicros S.p.A, 51% of the Company. Therefore there is no market for corporate control. The market for corporate control plays a key role in providing regular monitoring. Indeed it can discipline managers and boards who abuse their agency roles. The composition of the board of directors should ensure a majority of independent non-affiliated directors as an efficient monitoring device for companies with concentrated ownership structures like Campari where the main agency problem arises between controlling and minority shareholders.
What are the cash flow rights that Alicros has in Kaloyannis?
ReplyDeleteIn order to respond to this question, it is important to distinguish two main concepts. This tip represents an important rule of thumb, to understand who is the ultimate controlling party. Despite the fact that a firm may have a low percentage of voting right in another firm (i.e the numbers in % near each firm, in a pyramid structure) , the ultimate controlling party is expressed in cash flow rights. To calculate it, is necessary to multiply all the percentages near each entity, throughout the line. In this case we have: 51% * 100% * 75%. The result is that Alicros has 38% of cash flow right in Kaloyannis.
Is Kaloyannis an azienda?
ReplyDeleteAs we studied in the chapter 1, being an azienda requires three attributes: systemic coordination, economicità and decision making autonomy. At a first glance, we might see that the last characteristic cannot be present in Kaloyannis, since the ultimate controlling party is Alicros, controlled by Garavoglia family, who has the 75% of voting rights and 38% of cash flow rights in Kaloyannis. So it cannot be autonomous or have its own mission
1. What are the cashflow rights that alicros has in Kaloyannis?
ReplyDeleteAs we know, to calculate the cashflow rights we must start from the ownership that Alicros has over Davide Campari (51%) and multiply it by the ownership of Davide Campari over DiCi Holding (100%), and again multiply the ownership of DiCi Holding over Kaloyannis (75%). Therefore 51% x 100% x 75%.
2. Is Davide Campari an azienda?
We know that there are 3 attributes that allow us to say if an organization is an azienda: 1) systemic coordination, 2) decision autonomy and 3) economicità. We can safely say that for what concernes the 1) and 3) there should be no doubts about the fact that Davide Campari is an azienda. But since Davide Camapari is owned at 51% from Alicros, we can desume that there is no absolute decision-making autonomy: therefore it is not an azienda.
Author: Marleen Hansel
ReplyDelete1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
Question: What are the cash flow rights Cedar Rock Capital Ltd has in International Marques V.o.f.?
Answer: Cash flow rights measure the corporate ownership and can be calculated by multiplying the different percentages of the shares:
10,51% * 100% * 33,3% = 3,5%
In this case, Cedar Rock Capital Ltd has 3,5% cash flow rights in International Marques V.o.f., so it owns 3,5% of that company.
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Question: Is it possible to launch a hostile takeover on Davide Campari?
Answer: A takeover is a change in control of one company. It is hostile, when the board of directors of the company that should be taken over does not agree to a takeover. This is not possible, if the company is de jure controlled so if there is a rightful controlling party. In this case, a hostile takeover is only possible, if Alicros agrees on selling it shares in the Davide Campari company.
1) How many legal entities, BoD, Financial Statements and Consolidated Financial Statement are present in the map depicted ?
ReplyDeleteAccording with IAS27 ,there are 28 legal entities, 28 BoD, 28 financial statements and at least 5 consolidated financial statement (Alicros, Davide Campari, Di.Ci.E. Holding Bv, Redfire Inc., Sella & Mosca)
What are the cash flow and voting rights that Davide Campari has in International Marques V.o.f. ?
The voting rights are 33,3% and also the cash flow rights are the same, 33,3% (100%x33,3%).
Who is the ultimate owner of Davide Campari?
The ultimate owner is Alicros, which exercise a de jure control over Davide Campari.
2) What about the separation between ownership and control as well as between control and management ?
With the situation illustrated, we could argue that there is a separation between ownership which could trigger an agency problem (Type 2) so that conflicts between the controlling shareholder (Alicros) and the minority shareholders could arise. In this case, the Board must mediate these conflicts and oversee possible conflict against the primary interest of the firm.
Regarding the separation between control and management, there is separation if the parent delegates decision-making power to the subsidiaries, for instance if Davide Campari delegates autonomy to Campari do Brasil, adopting a model like the Local Board, we have separation between control and management.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteWhat are the cash flow rights that Alicros has in Odessa sparkling wine Company?
In order to calculate the cash flow rights we must multiply the percentage of voting rights that Alicros has over Davide Campari (51%), by the percentage owned by Davide Campari over DiCi Holding (100%), and again by the percentage owned by DiCi Holding over Odessa sparkling wine Company (99.8%). The results 0.51*1*0.998 = 0.5089 show that Alicros has 50.89% cash flow rights in Odessa sparkling wine Company.
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?)
You are the director of Redfire Inc. USA and you suspect that Davide Campari wants to loot and exploit your company in favour of his company. What is your line of action?
In this situation, we are faced with a dilemma: we certainly have a duty to Davide Campari as a holding company. In addition, we need always to keep in consideration what is best for our company Redfire Inc. Therefore, the possible lines of action here are two: we can either serve the parent, not minding our stakeholders; or we can serve our company and risk being sued or fired by the parent Davide Campari. The very last option that we might consider is to quit the job.
1) Is Davide Campari a pure or an operating holding company?
ReplyDeleteSince Davide Campari is engaged in business activities and at the same time, it is also a holding company, it can be defined as an operating (or mixed) holding company. If, instead, we take into account Alicros, which is the ultimate owner of Campari, it is instead a pure holding company because it just owns shares of others companies without producing anything.
2) What type of Corporate Governance System does Campari have?
As 95% of Italian companies, also Davide Campari has a Traditional Model instead of a one-tier or two-tier model. In fact, surfing on its webpage, it is possible to observe how Campari has both a board of directors and a board of statutory auditors (collegio sindacale) which are the main feature of Traditional Model. In fact, then, the board of statutory auditors is elected by the board of directors and it is in charge of monitoring compliance with law and monitoring organizational, administrative and accounting structures.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteCan the Davide Campari company be held responsible for damages or misconducts carried out by its subsidiaries?
Companies, which belong to a business group, have been traditionally considered as different legal entities; each with its own liabilities. This mechanism has pushed firms to abuse of some tools such as lending money to directors or other RTPs at the expenses of shareholders. However, because of this abuse, many countries have adopted new pieces of legislation to pierce the corporate veil and make a parent company accountable for misconducts of its own subsidiaries. In Italy, for example, the Article 2497 of Italian Civil Code maintains that when a subsidiary is controlled and managed in the interest of a parent company, the latter is responsible for misconducts or damages caused by the former.
Therefore, the main consequence of the legislation that aims to pierce the corporate veil is the establishment of the following trade-off. On one hand, companies wants to join business groups in order to reduce transaction costs; on the other hand, current legislation is hampering the benefits of joining a business group, for example, forcing them to disclose RPTs with firms that belong to the same group (companies are afraid of disclosing RPTs since these transactions tend to push away investors).
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
What type of agency problem do we have Davide Campari s.p.a.?
As the legal entity map shows, the main shareholder of Davide Campari s.p.a. is Alicros accounting for 51% of the shares. Therefore, we come up with two conclusions. Firstly, Alicros is the ultimate owner of the company. Secondly, Davide Campari s.p.a. has a concentrated-ownership structure. In this scenario, it is expected to face a type II agency problem in which the major shareholder (Alicros) may expropriate benefits at the expenses of minority shareholders. In this context, the role of the board of directors should be that of preventing the organization from being run only in the interest of the major shareholder since the interest of minority shareholder as well needs to be protected.
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ReplyDeleteThis comment has been removed by the author.
ReplyDeleteThis comment has been removed by the author.
ReplyDelete1 – Using the legal entity map of Campari group and the content of this chapter post at least one question and the connected answer.
ReplyDeleteQ: Does Campari group's legal entity map represent a pyramidal business group?
A: First of all, let's recall the fact a pyramidal business group is an organizational structure in which a holding company (here Davide Campari) owns shares in subsidiaries, which in turn have subsidiaries of their own. According to the depicted map, this first criterion is respected because Davide Campari holding holds directly four subsidiaries (Sella & Mosca, Campari do Brasil Ltda, Redfire Inc. (USA), and Di.Ci.E Holding Bv (Olanda)), which in turn hold their subsidiaries.
Moreover, according to La Porta et al. (1999) “a firm’s ownership structure is a pyramid (on the 20 percent definition) if: 1) it has an ultimate owner, and 2) there is at least one publicly traded company between it and the ultimate owner in the chain of 20 percent voting rights”.
The first point is for sure true; in fact, there exists an ultimate owner, Alicros, who owns 51% of shares in the holding Davide Campari. In addition, also the second point is true; in fact there exists also a publicly traded company, that is Davide Campari itself, traded on the italian Borsa Valori in Milan.
To conclude, we can assert that Davide Campari has a pyramidal business group structure.
2 – Using the legal entity map of Campari group and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Q: According to the classification of the aziende made by Cavalieri in 1999, what kind of businesses can Davide Campari be grouped in?
A: This classification is based on the relationship firms have with the market. Given this, we can group companies by considering whether they produce for the market or not, namely business entities and non-business entities, respectively.
It seems obvious that Davide Campari is a business entity.
Moreover, among business entities, we can recognize those who trade in competitive markets and those who trade in non-competitive ones (such as monopoly, oligopoly, etc...). Davide Campari belongs to the first group, those who trade in competitive markets, being the 32nd company among the Top100 firms within the Beverage Industry according to the 2014 chart made by the top-ranked bevindustry.com.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer.
ReplyDeleteQ. Is there a high risk of expropriation (profit tunneling) by the controlling party?
A. The separation between ownership and control in the subsidiaries at the bottom of the group is not high in most cases: almost all of the subsidiaries in the Campari group are wholly-owned. This way, Alicros, as the ultimate controlling party, has maximum cash flow rights in them and does not have a reason to facilitate tunneling.
It is only on the case of International Marques V.o.f. (Canada), where Alicros has only 16% of cash flow rights (51%*33%), that may lead the controlling party to seek some expropriation of funds.
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Q. Is International Marques V.o.f. (Canada) an azienda?
A. To call this organization an azienda, we need to look at the three elements of azienda.
Systemic coordination. We need to see, whether International Marques V.o.f.creates value for other units of the group and functions for the benefit of economy of the group. In this case, we may assume that there is systemic coordination in the company.
Economicita. This point requires access to financial performance of the firm. We may assume that in this case economicita is reached.
Decision-making autonomy. There is no information as to other major shareholders in International Marques V.o.f. or shareholders agreement (coalition) between them. In both cases, however, the decision making autonomy will not be reached: either Campari or a control by coalition will be able to affect the decision making process.
Thus, we cannot call International Marques V.o.f. (Canada) an azienda.
1 Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteIs Campari group a simple group or a complex group?
It is a complex group since it has direct and indirect control and different levels of grouping.
2 Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
-Is it possible to have an agency problem type I in the Campari group?
No, the agency problem type 1 arises when the ownership is diffuse and "there is a conflict of interests between outside shareholders and managers."
In this case Alicros, with 51% of the shares, has effective control of the firm and here the conflict can arise between the controlling shareholder and the minority shareholders.
1.How much is the Davide Campari voting right in kaloyiannis koutsikos distilleries sa ( Grecia)company ?
ReplyDeleteThe answer is 75%
2.what is the cash flow right of alicros international marques v.O.F(olanda)?
The answer is 51%x100%x33.3% = 0.16983
1) Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer
ReplyDeleteWhat are the cash flow rights that Alicros owns in Campari Benelux Sa (Belgio)?
Well to calculate the cash flow rights Alicros owns in Campari Benelux we have to multiply the percentage that Alicros has in Davide Campari (51%) with the percentage that Davide Campari has in Di.CI.E holding BV (Olanda) (100%) after that with the percentage that DI.CI.E has in Campari Deutschland (100%) and so far, till the multiplication of the percentage International Marques V.o.f. has in Campari Benelux Sa (Belgio). So the calculation is:
51%*100%*100%*100%*100%*33,3%*100%= 16,98% This means that Alicros owns the percentage of 16,98% of cash flow rights in Campari Benelux Sa, and we know from the theory that the cash flow rights are used to determine the ownership.
2) Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
(Chapter IV) Using the stewardship theory how should be composed the board of directors of the listed holding Davide Campari?
Davide Campari is a family owned company, owned by Garavoglia’s family with the percentage of 51%. Under the stewardship theory the board of directors should be composed by a majority of internal directors because they have a higher knowledge about the company and they are trustworthy people whose purpose is reaching the firm and shareholders ‘ interests, so their interests are aligned with the ones of the principals and not in contrast. With a stewardship theory perspective the CEO duality is evaluated positively because it is a way to reach rapidly the efficiency for the company. Usually these characteristics are respected in family run businesses
1) Define the concept of “control” in the business groups in relation with consolidating the financial statement. Imagine the Sella & Mosca commerciale srl having decision-making autonomy: must the Alcross consolidate the financial statement with Sella & Mosca commerciale srl?
ReplyDeleteIn a business group, a legal entity must be controlled by its parent company, where the control is the power to govern the financial and economic activity of the corporation, even if this power is not exerted.
According to the definition of “control”, Alcross must always consolidate its financial statement with Sella and Mosca Commerciale srl since it possess, even if indirectly, 100% of the control rights, therefore the former has the power to govern the latter. The exertion of the power is not relevant.
2) Take into consideration the International Marques V.o.f (Olanda). In which case can DI.CI.E Holding Bv be considered a dominant shareholder, and in which case is it a qualified minority one?
To answer the question it is necessary to use the 20% rule. DI.CI.E Holding Bv is a dominant shareholder if it possess more than 20% of voting shares, and if this percentage allows the company to dominate the shareholders meeting.
On the other hand, if another shareholder owns, for instance, the 51% of the voting rights of International Marques V.o.f (Olanda), then DI.CI.E Holding Bv is just a qualified minority shareholder since, possessing more than 20% of voting rights, it has a substantial influence in the shareholding meeting but not a dominant position.
1. Using the legal entity map of Campari group and the content of this Chapter post at least one question and the connected answer.
ReplyDeleteWhat are the cash flow rights that Alicros has on CISC’Odessa Sparkling wine company?
The answer is 51% x 100% x 99,8%. Moreover I’ll like to underline that in case of separation between ownership and control cash flow rights may differ from voting rights; corporate ownership is measured by cash flow rights while control is measured by voting rights.
2. Using the legal entity map of Campari group and the content of this Chapter post at least one question and the connected answer;
Suppose that Campari group operates in a single sector can Kaloyiannis Koutsikos be considered a single azienda?
The fact that the group operates in a single sector indicates that the activities carried out by the group integrated with each other thus we may conclude that Kaloyiannis Koutsikos cannot be qualified as an azienda as it lack decision making power, hence Campari business group as a whole is a single azienda.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteHow many legal entities, Board of Directors, Financial Statements and Consolidated Financial Statement are you able to identify in the map of Campari Group?
Looking at the IAS 27, there are 28 legal entities, Board of Directors and Financial Statements.
There are at least 5 consolidated financial statement: Alicros, Davide Campari, Di.Ci.E. Holding Bv, Redfire Inc., Sella & Mosca.
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Who is the ultimate owner of Davide Campari and is it possible to launch a hostile takeover on Davide Campari?
The ultimate owner is Alicros S.p.a., that exercise de jure control over Davide Campari. An hostile takeover, in this case, is not possible since the company is controlled with the 51% of the shares by Alicros S.p.A,.
Question 2
ReplyDeleteConsider the following situation: Rosa Anna Magno Garavoglia holds 60% of the shares of Alicros SpA, which in turn owns 51% of the Campari Group (this implies that Mrs. Garavoglia has a 31% stake in the Group). Her son, Luca Garavoglia, is the current Chairman of the Board of Directors for the Campari Group. In accordance with the definition provided in Chapter 6, does Luca Garavoglia’s position on the Board constitute a conflict of interest?
Answer: Yes
As a family member of Campari’s ultimate controlling shareholders, Luca Garavoglia’s BoD position constitutes a potential conflict of interest due to secondary interests involving a related party. Mr. Garavoglia’s familial ties with the dominant shareholders could possibly lead to impairment of judgment or corruption of will with multiple implications, including but not limited to: interference with his everyday decision-making; opportunistic behavior with partiality towards decisions that benefit his family and/or its holding company (expropriation); threat of an agency conflict type II as a result of such partiality and expropriation which damages the interests of minority shareholders.
1. What are the cash flow rights Morgan Stanley Management Inv. Ltd has in Kaloyannis koutsikos distilleries sa?
ReplyDeleteCash flow rights represent the ownership and can be calculated multiplying the percentages of the shares:
2,04% * 100% * 75% = 1,53%
Morgan Stanley Management Inv. Ltd has 1,53% cash flow rights in Kaloyannis koutsikos distilleries sa, so it owns 1,53% of that company.
2. Suppose that Campari group operates in a single sector, can Campari do Brasil Ltda be considered as an azienda?
This subsidiary can be considered a single azienda if it has the attributes of azienda's definition: systematic coordination, decision-making autonomy and economicità. If the holding has delegated the decision making power the subsidiary can be an azienda.
1. What are the cash flow rights of Morgan Stanley Management Inv. LTD over International Marques V.o.f. (Olanda)?
ReplyDeleteTo answer this question we can start from Int. Marques and go upwards or downwards. Let’s go downwards:
-Morgan Stanley Management Inv. LTD owns 2.04% of Davide Campari.
-Davide Campari owns 100% of Di.Ci.E. Holding bv (Olanda)
- Di.Ci.E. Holding bv (Olanda) owns 33.3% of the shares of International Marques V.o.f. (Olanda).
So we can compute the cash flow rights of Morgan Stanley Management Inv. LTD with the simple calculation:
CFR = (0.0204*1*0.333)*100 = 0.67932%
2. The question would be if and how we can identify an Azienda using the legal entity map.
The answer to this question would be yes, we can identify an Azienda here. We know that the conditions for being an Azienda are three:
-Economicità
-Systemic Coordination
-Decision-making autonomy
As for the first attribute, it would require extensive and complicated research, but we will simplify the task assuming that all legal entities in the map operate with efficiency and efficacy. Then we have to narrow down the task using the second attribute. We can imagine that the holding company Davide Campari coordinates all the subsidiaries in order to achieve the notorious system-effect. Then is Davide Campari an Azienda? We cannot know for sure since we don’t know what kind of influence the de jure owners of the firm, i.e. Alicro, exercise on the firm, but we will assume that, with 51% of the voting rights, they control the firm. Then the firm has no decision autonomy and the Azienda can be identified as the groupo of companies that includes all the companies in the map except Cedar Rock Capital, Morgan Stanley and Independent Franchise Partners Up.
1. Calculate the cash flow rights that Alicros has in Kaloyiannis Koutsikos Distilleries Sa Company?
ReplyDeleteThe ownership of organization is measured by cash flow right while the control of organization by voting rights. To calculate cash flow rights we have to multiply percentage of voting rights.
So here we have to multiply the percentage of shares of Alicros in Davide Campari that is 51% by the percentage owned by Davide Campari over DiCi Holding -100% and by the percentage owned by DiCi Holding over Kaloyiannis Koutsikos Distilleries Sa-75%. In result we have that Alicros cash flow rights in Kaloyiannis Koutsikos Distilleries Sa is 38% (51%*100%*75%).
2. Let`s consider that the majority of BoD of Campari do Brasil is executive directors. How would we evaluate the board under the stewardship theory?
By stewardship theory that is based on shareholders theory managers considered as best stewards of the company and organization assumes them as a trustworthy and that they are motivated to maximize the organization`s profits. So if there more executive directors in BoD than the independent under the stewardship theory would consider it as a positive behavior.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer.
ReplyDeleteWhat are the cash flow rights that Alicros has in International Marques V.o.f. (Olanda)?
To calculate the cash flow rights we have to multiply the percentage of voting rights that Alicros has over Davide Campari 51%, by the percentage owned by Davide Campari over DiCi Holding Bv (Olanda) 100%, and by the percentage owned by DiCi Holding Bv (Olanda) over International Marques V.o.f. (Olanda) 33,3%. The results (51%*100%*33,3%) show that Alicros has 16,983% cash flow rights in International Marques V.o.f. (Olanda).
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Who is the controlling shareholder of Davide Campari group?
The controlling shareholder is Alicros, as it has 51% of shares.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteWhat are the cash flow rights that Alicros has in Odessa sparkling wine Company?
In order to calculate the cash flow rights we must multiply the percentage of voting rights that Alicros has over Davide Campari (51%), by the percentage owned by Davide Campari over DiCi Holding (100%), and again by the percentage owned by DiCi Holding over Odessa sparkling wine Company (99.8%). The results 0.51*1*0.998 = 0.5089 show that Alicros has 50.89% cash flow rights in Odessa sparkling wine Company.
2. By using the legal entity map of Campari group and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?)
You are the director of Redfire Inc. USA and you suspect that Davide Campari wants to loot and exploit your company in favour of his company. What is your line of action?
To my opinion, we are confronted with a dilemma: we surely have a duty to Davide Campari as a holding company. In addition, we need always to keep in consideration what is best for our company Redfire Inc. Therefore, the possible lines of action here are two: we can either serve the parent, not minding our stakeholders; or we can serve our company and risk being sued or fired by the parent Davide Campari. The very last option that we might consider is to quit the job.
1. Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteDiscuss about the cash flow rights that Alicros has in International Marques V.o.F. (Olanda).
To calculate the percentage of the cash flow rights of Alicros we have to multiply all the values from the holding to the subsidiaries. So the result will be expressed as follow: 51%*100%*33,3%. The final amount will be 16,83%.
2. Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Is it right to say that Davide Campari faces a type II agency problem?
Yes, we can understand it looking at the legal map. Alicros has the 51% of the total shares; it means that it is the major shareholder and it could have some benefits through its operations towards the other shareholders. As mentioned above, without the right controlling, it could generate conflicts of interest between controlling and non-controlling shareholders.
What are the cash flow rights that Alicros has in International Marques V.o.f. (Olanda)?
ReplyDeleteThe cash flow rights measure the corporate ownership and in this case they are:
51%x100%x33.3%=16.98%
Is there a case of CEO Duality?
Davide Campari S.p.a. is 51% owned by Garavoglia Family through Alicros S.p.a. Luca Garavoglia plays the role of Chairman in the Board of Directors but the role of CEO is played by Bob Kunze-Concewitz. So, in this case, CEO duality, a characteristic that reduces the board independence, is absent.
1 Suppose that Kaloyiannis Koutsikos Distilleries Sa owns the 55% of a Company X, What are the cash flow rights that Indipendent Franchise Partners Llp has in X ?
ReplyDeleteThe right computation of the cash flow right in this case should be made by starting from the top of the ownership chain, and by so from the Franchise Partners Llp. The computation here is 2,02%*100(Di.Ci.E Holding BV)*75%( Kaloyiannis Koutsikos Distilleries Sa)*55%(X). The result is a ownership stake of 0,8%.
2. What couold be a possible potential conflict of interest situation in the board of directors of Sella and Mosca? How to resolve it ?
A situation of Coi in Sella and Mosca’s top management could be the case of a board member that has to participate to the decision making process of buying from different supplier where this supplier’s COO is an immediate family member of that board member. In that case the directors should clarify other member about the connection with the supplier’s COO and the whole board has to decide if the supplier is the best in the market place and also if the board member that has connection with it and by so excluding it from the decision process.
1) Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteWhat are the cash flow rights that Cedar Rock Capital LTD has in Kaloyiannis Koutsikos Distilleries Sa?
According to the fact that Cedar Rock Capital LTD owns 10,51% shares of Davide Campari, that Davide Campari owns 100% of Di.Ci.E Holding BV, and that the latter owns 75% of Kaloyiannis Koutsikos Distilleries Sa, the cash flow rights are equal to 10,51% * 100% * 75% = 7.9%
2) Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Can we say that there is a cross-shareholding situation in the Campari group?
We describe cross-shareholding the situation where a company owns a certain amount of shares of its controlling shareholder, thus increasing the power of the business relationship. In our case, no cross-shareholding situation can be seen, since Davide Campari does not own any share of its controlling shareholder Alicros
Q: Is it correct to say that Alicros is the ultimate controlling party of Davide Campari Group? Why? Motivate your answer.
ReplyDeleteA: No, it is not because the ultimate controlling party shall be an individual, i.e. a physical person, or a group of individuals who, according to IAS 27, have the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Thus, according to this definition, the ultimate controlling party of Campari Group must be the ultimate controlling party of Alicros, while Alicros itself must be properly defined as the ultimate owner.
Unfortunately, from this chart, we cannot get further information about who the ultimate controlling party of Campari actually is, but I know from an article I’ve recently red that Alicros is controlled by the Garavoglia Family. Then, this family is the ultimate controlling party of the group.
Q: Should all the companies at the top of the chart have signed a shareholder agreement to jointly govern the group, is it still correct to say that the Garavoglia family are the ultimate controlling party of Campari in any case? Why?
A: No, it would be no longer correct, since in case of a shareholder agreement it would be the content of such an agreement to determine who is the ultimate controlling party, and unless it does not clearly specify so, the ultimate controlling party is supposed to be the entire group of individuals controlling the companies that signed the agreement.
For this reason, if the agreement states that the group is jointly governed by the shareholders agreement, then the Garavoglia family is no longer the only ultimate controlling party.
1)What are the cash flow rights that Morgan Stanley Management Inv.(gestione risparmio) has in CISC Odessa Sparking Wine Company?
ReplyDeleteTo Calculate the cash flow rights we have to start from the fact that CISC Odessa Sparking Wine Company is owned by DI.Ci.E. Holding by (Olanda) for 99.8% of its shares, then DI.Ci.E. Holding by (Olanda) is totally owned by Davide Campari and at the end Morgan Stanley Management Inv.Ltd (gestione risparmo) has 2.04% of the share of Davide Campari. So the calculation will be
99.8%* 100%* 2.04%= 2.03592%.
2)According to the four model, what is in your opinion the most appropriate choice for the role that should be guaranteed to Campari do Brasil’s board from the Parent Company?
The role of subsidiary boards in multinational enterprise should be selected according to the need of both Global Integration and Cost Reduction Preassures as well as Local Market Responsiveness.
In my opinion the most critical points in such decision are the need for Market responsiveness that is very high because of the difference between the Italian market and the Brasilian one, the global image and identity that have to be maintained within the Campari Group but also the consideration that Campari do Brasil’s company is fully owned by Davide Campari, so has to be in line with its behavior.
For those reasons I would suggest a Dual reporting model as option for the local subsidiaries of Multinational Enterprise, in which there are both local board and a parent board governing the subsidiary. The local Ceo has to accomplish to two reporting line, one to the local board and another to the parent management structure.
This model could be very helpful in order to improve the understanding of the local market and create network more easily within it.
(1) CH. VII: Q: " In which financial statement can we find the eventual transactions between Campari Benelux Sa and Campari Australia Pty Ltd?"
ReplyDeleteWe find these eventual transactions in separate financial statements. In fact, in the consolidated financial statement presented by Campari they are not present because the "consolidated financial statement of a group of companies must be prepared as if the entire group constitutes a single economic entity, in order to avoid the misrepresentation of the scale of group's activities." We have to notice that we find the transactions in separate financial statements only if they are listed companies. If they are not listed, we find the transactions only in the sub-consolidated financial statements of the sub-holdings.
(2) Q: "Making the hypothesis for which Alicros is a Public company, who is the Ultimate Controlling party of Davide Campari?"
If Alicros would be a public company, no one among the shareholders would have the power to exercise the control over Davide Campari. As far as we know the definition of the ultimate controlling party and that it has to always to be a natural person, we can conclude that the Ultimate controlling party,in this case, would be the Top management of Campari.
+ What are the cash flow rights that Alicros has in International Marques V.o.f. (Olanda)?
ReplyDelete− For calculating cash flow rights, first we should look at the percentages of ownership. Alicros owns Campari group with 51%. And Campari group owns Dı.Cı. E Holding Bv (Olanda) with 100%, which owns International Marques V.o.f. (Olanda) with 33,3%. So the calculation is like this;
(0,51)*1*(0,333)= 0,169 so the answer is 16,9%
+ What is the ultimate controlling party of Campari Group?
− Alicros is the ultimate controlling party of Campari Group with 51%.
1) Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer:
ReplyDeleteQ: What are the cash flow rights that “Alicros” has in “Campari do Brasil Ltda”?
Cash flow rights are a measure of corporate ownership and can be calculated throgh a simple multiplication. In this case, cash flow rights are simply (51 % * 100 %) = 51 %
Thus, Alicros owns 51 % of Campari do Brasil Ltda.
2) Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer:
ReplyDeleteQ: what are the co.go. options for local subsidiaries?
A: We can see from the legal entity map that the Campari business group is composed by the Company (Davide Campari) and several subsidiaries. Taking into consideration only the legal entity map, it is not possible to understand what is the role of the subsidiaries. After the reading of the paper written by Kiel et al. (“Corporate Governance Options for the Local Subsidiaries of Multinational Enterprises,2006”) we are able to make some hypotheses. The authors suggest that there is a link between the international strategy a company adopts and its subsidiary board model. For instance, in the paper there is a set of four “propositions” about the relationships between the business strategy of the parent company and the model of corporate governance of the subsidiaries. As stated by the authors, “these four models are for illustrative purposes, as there are an infinite number of variations available”. Thus, according to Kiel et al. It is possible to link:
- global strategy (same products sold and same marketing strategies) → direct control model
- transnational strategy (same products sold, but different marketing strategies across countries) → advisory board model
- international strategy (centralization of core competencies, such as R&D and marketing. Subsidiaries are free to make decisions) → dual reporting model
- multidomestic strategy (focus on local responsiveness) → local board model
In my opinion, the advisory board model could be a good option for Campari. The advisory board has no decision-making power and advises the CEO. The main strenght of this model regards the parent's capacity to control directly the subsidiaries. From the legal entity map we have seen that a high percentage of subsidiaries are wholly owned by Campari.
1)What kind of Corporate governance options for the local subsidiaries does Campari group adopt? I would suggest that it is adopted a “Local Board” solution; in order to have more field control and capacity to approach the local markets . Of course there could be a lack of parent’s control but the benefits obtained by this solution are higher.
ReplyDeleteIs it Campari group a clear example of a multilevel group? Of course it is; it is necessary to focus on the DI.CI.E. Holding that as reported by the Bloomberg website, it operates as a subsidiary of Davide Campari.
2)By the firm website is it possible to understand the mission of the firm itself? Looking at the Statute, in particular the article number 3, is it possible to understand that the company’s main objective is the beverage and food market without excluding other financial and real estate acquisitions and in general, operations, even if not connected to the food and beverage sector.
Question n°1: Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer.
ReplyDeleteQ: What can you say about the Campari business group structure? Can you describe it defining its principal features?
A: The business structure of Campari is complex; as the legal entity map suggests us the structure concerns different levels of grouping as well as direct and indirect control.
The controlling shareholder is Alicros S.p.A. that, guided by the Garavoglia Family, owns 51% of the Campari equity capital. Alicros S.p.A. is the ultimate owner of the business group.
Furthermore for what concerns the minority shareholders, there are: Cedar Rock Capital Ltd with 10,51&% of the shares, Morgan Stanley Management Inv. Ltd with 2,04% and Independent Franchise Partners Llp with 2,02%.
Moreover there is Davide Campari, the reference Holding Company and its four sub-holdings:
Sella & Mosca, Campari do Brasil Ltda, Redfire Inc. and finally Di.Ci. E. Holding Bv.
These sub-holdings have in turn several subsidiaries (or operating companies) such as Sella & Mosca Commerciale S.r.l., Cabo Wabo Llc, Campari France S.a. and so forth (pyramidal business group structure).
Question n°2: Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?).
Q: According to you which are the instruments of control that the controlling party can manage in order to dominate the Davide Campari Company?
A: From the theory we know there are two types of instruments that can be used: the equity instruments and the non-equity ones. The former concern investments in subsidiaries and the ties are supposed to be stable and lasting; they are referred to the shares of the ownership hence to the chance to express the voting rights during the shareholders meeting. The control of a corporation generally exists by reason of the ability to elect a majority of the directors of the corporation - de jure control.
On the other hand we talk about de facto control when, for instance, a person holds less than 50% of the voting rights of a corporation but enough of "other influence" to force the corporation to act in accordance with his/her wishes.
Conversely the non-equity instruments can be formal (contracts of control) or informal (economic control, personal ties).
As far as the Campari group is involved, we know that Alicros S.p.A. exercises a de jure control since it owns 51% of the Campari’s equity capital. Due to this the instruments of control used are the equity ones.
1)Using the legal entity map of Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer
ReplyDeleteQuestion - What are the cash flow rights that Alicros owns in Kaloyiannis?
Answer - In order to calculate the cash flow rights that Alicros owns in Kaloyannis, we have to multiply the percentage of voting rights that Alicros has in Davide Campari (51%) by the percentage owned by Davide Campari has in Di.CI.E holding BV (Olanda) (100%), by the percentage owned by DI.CI.E has Campary International S.A.M (100%), by the percentage owned by Campary International S.A.M has on Campary Schweiz (100%) and by the percentage Campary Schweiz has in Kaloyiannis (75%). The calculation is the following: 51%*100%*100%*100%*75%= 38,25%. What does it mean? Since we know corporate ownership is measured by cash flow rights, saying Alicros has a 38,25% cash flow rights (=property rights) over Kaloyiannis equals saying Alicros has an ownership of 38,25% over Kaloyiannis and is entitled to 38,25% of its dividends.
2)Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?)
Question - Is it possible to talk about Type I agency problem in Davide Campari?
Answer - The ownership structure of a corporation affects the nature of the agency problems between shareholders and among shareholders and minority shareholders. We can encounter a Type I agency problem usually in widely held companies, so when ownership is diffuse: this is caused by conflicts of interests between outside shareholders and managers, who own an insignificant amount of equity in the firm. In the case of Davide Campari, there is not this type of problem. Instead, we can talk about another agency problem: Type II.
This is present when, on the contrary, the ownership is concentrated, namely in situations where one or few owners has the effective control of the firm; the conflict of interest in this case it’s between controlling shareholders and minority ones.
The greater are the control rights of the controlling shareholder(s) the greater is his(their) ability to influence the way the company is run, and hence the greater is his(their) ability to obtain private benefits of control at minority shareholders’ expense. In the Campari case, there is a concentrated ownership and there is a major shareholder, Alicos (with 51% of the shares), which has the effective control of the film. So, the most appropriate type of conflict it could face, due to the structure of ownership, is the Type II rather than Type I.
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ReplyDelete1) Using the legal entity map of the Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer
ReplyDeleteWho is the ultimate owner and the ultimate controlling party of Sella & Mosca Commerciale s.r.l.?
The ultimate owner is Alicros bacause Alicros controls Davide Campari, Davide Campari controls Sella&Mosca Commerciale. The ultimate controlling party is the person that possesses the major number of share of Alicros.
Calculates the cash flow rights that Cedar Rock Capital LtD (gestione risparmio) has in International Marques V.o.f.
In calculating the cash flow rights we have to multiply the cash flow rights in all the chain of the sub holding: Cedar Rock Capital LtD has the 10,51% of cash flow rights in Davide Campari, Davide Campari has the 100% of cash flow rights in Di.Ci.E Holding Bv and Di.Ci.E Holding Bv has the 33,3% of cash flow rights in International Marques V.o.f.. Multiplying all the percentages 0,1051*1*0,333=0,035. International Marques V.o.f. has the 3,5% of cash flow rights in International Marques V.o.f..
1) Using the legal entity map of the Campari group (see more ahead) and the content of this Chapter post at least one question and the connected answer
ReplyDeleteWho is the ultimate owner and the ultimate controlling party of Sella & Mosca Commerciale s.r.l.?
The ultimate owner is Alicros bacause Alicros controls Davide Campari, Davide Campari controls Sella&Mosca Commerciale. The ultimate controlling party is the person that possesses the major number of share of Alicros.
Calculates the cash flow rights that Cedar Rock Capital LtD (gestione risparmio) has in International Marques V.o.f.
In calculating the cash flow rights we have to multiply the cash flow rights in all the chain of the sub holding: Cedar Rock Capital LtD has the 10,51% of cash flow rights in Davide Campari, Davide Campari has the 100% of cash flow rights in Di.Ci.E Holding Bv and Di.Ci.E Holding Bv has the 33,3% of cash flow rights in International Marques V.o.f.. Multiplying all the percentages 0,1051*1*0,333=0,035. International Marques V.o.f. has the 3,5% of cash flow rights in International Marques V.o.f..
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ReplyDelete2) Using the legal entity map of the Campari group (see more ahead) and the previous Chapter post at least one question and the connected answer
ReplyDeleteDescribe the ownership structure of davide campari. What is happened with the changes where the general meeting of the shareholders have converted the ordinary shares in loyalty shares? What effects could create this change in the governance structure?
Alicros is the major shareholder of Davide Campari and it has a de jure control because regard the map it owns the 51%. Cedar Rock Capital Ltd is an institutional relevant shareholder. The remaining two shareholders could be defined as relevant shareholders because they own more then 2% each one. In the structure above mentioned the agency problem is the type 2 principal-principal.
The extraordinary shareholders meeting has approved the conversion of the shares in loyalty shares. (http://www.repubblica.it/economia/finanza/2015/01/28/news/voto_maggiorato_campari-105975384/) In the loyalty shares the "loyal" shareholders, who owns the share from at least two years, see an increase in their voting power. This creates a misalignment between the cash flow rights and voting rights.
This change do not create any change in the control of the firm, because Alicros passes from the 51% to the 67% and it already had the the jure control with 51%. Differently this change amplify the agency problem type 2, it reduces the voting power of all non loyal shareholders. In this way all the non loyal minority shareholders see reduced their "voice" power in the shareholder meeting.
Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected ?
ReplyDeleteWhat Kind of agency problem may arise in this kinds of corporate ownership structure?
The answer is Agency problem Type 2 , which is discuss about the interest between the major shareholder and the minority shareholder.
• Could it be possible facing conflict of commitment in the Campari Group?
ReplyDeleteYes, it could be possible. We could have a situation where the directors of Alicros is accepting, at the same time, the role of executive in the board of Sella and Mosca and sitting one more governance body at the same time. Although this could mine the way work is developed as we could have busy directors.
• Compute cash flow rights that Morgan Stanley Management Inv. Ltd has over Cisc Odessa Sparkling Wine Company.
In order to calculate the cash flow rights Morgan Stanley Management has over Cisc Odessa Sparkling Wine Company, we have to consider the voting rights the former has over Davide Campari ( 2,04%), those voting rights Davide Campari has over Di.Ci. E Holding Bv (100%); those the former has over Campari International (100%). Subsequently, we consider the voting rights Campari International has over Campari Schweiz (100%), then those the former has over Kaloyiannis (75%); Moreover we will consider the voting rights Kaloyiannis has over Campari Argentina (100%) and finally those of Campari Argentina over Cisc (99%).
We have to multiply all these percentages in the same order as described. The results will be 1,5147% rounded 1,52%. This value represents the cash flow rights Morgan Stanley has over Cisc Odessa.
1) What are the cash flow rights that Alicros has in Kaloyannis?
ReplyDeletein order to understand who has the ultimate controling party we have to calculate the cash flow rights. therefore:
51% * 100% * 75% = 38% of cash flow right in Kaloyannis
2) can we consider any of International Marques V.o.f. (Canada) as a single azienda?
this group is working only in the field of beverages . we we cannot consider International Marques V.o.f. (Canada) an azienda. the conditions of being a azienda is to have systematic coordination, decision-making autonomy and economicità.
therefore, if the subsidary does not have any of these conditions that can not be a azienda. to explain more, in this case if the susbsidary is creating value for the group we can assume it as a systemic coordination. We may assume that we have the Economicita. and at the end the decision making autonomy is affected by Campari or control by coalition.
1) Using the legal entity map of Campari group and the content of this Chapter post at least one question and the connected answer;
ReplyDeleteWhat are the cash flow rights that Alicros owns in International Marques V.o.f?
Alicros is the controlling shareholder of the Davide Campari group. The map outlines the control chain that characterized the group by showing the voting rights owned. However, the ownership that Alicros has in each subsidiaries can be computed through the cash flow rights. Thus, we need to start from Alicros and multiply the fraction of votes owned in Davide Campari (51%) by the votes of Davide Campari over DiCi Holding (100%), and multiply the result by the voting rights of DiCi Holding in International Marques V.o.f: 51% x 100% x %33,3 .
2)Using the legal entity map of Campari group (see more ahead) and the content of the previous Chapters post at least one question and the connected answer (e.g. Chapter IV, using the agency theory how should be composed the board of directors of the listed holding Davide Campari?
In the case of Campary group, is the outsider ratio an indicator for board independence?
According to the theory, the outsider ratio in a widely held corporation can lead to an independent evaluation of managerial decision. However, the outsider ratio in a family firms with concentrated ownerships, might not be a good indicator of board independence. Indeed, we know that in Davide Campari group the board should be composed of outsider directors independent from the controlling shareholder, in order to protect minority shareholders from the risk of expropriation. The problem is that in this case the outside directors may be selected based on their affiliation rather than their expertise.