Italy's ageing supermarket king looks to secure his legacy

* Caprotti in talks with private equity funds over possible sale

* Group valued at up to 6 billion euros

* Ill health, dispute with two children could complicate sale

By Silvia Aloisi, Claudia Cristoferi and Elisa Anzolin

MILAN, Sept 30 Having worked all his life to build Italy's fourth biggest supermarket chain and protect it from rivals, 90-year-old Bernardo Caprotti spent the past few months fighting to make sure his brand will thrive without him.

The billionaire, working from his three-storey, heavily guarded home in central Milan, has been in talks with private equity funds to sell his Esselunga chain for as much as 6 billion euros ($6.7 billion), people close to the matter said.

Wary of selling out to rivals or handing the business down to his squabbling children, Caprotti wants the private equity bidders to give a rare promise: keep the Esselunga brand and the business for the long term, up to 10 years, the sources said.

"Any deal would have to guarantee the continuity of the business and avoid a break-up," said one source. "All he cares about is the good of the company."

An Esselunga spokesman declined to comment on the status of any sale talks, which sources say include CVC Capital Partners, Blackstone and BC Partners. Spokesmen for the three declined to comment.

Caprotti founded the company in 1957 with his brothers and U.S. businessman Nelson Rockefeller, developing the first U.S.-style supermarket chain in Italy, before becoming its sole owner. It now employs 22,000 people and last year had sales topping 7 billion euros.

Over the years, Caprotti spurned approaches from several competitors including U.S. giant Wal Mart and Belgium's Delhaize, so it came as a surprise for the Italian business community when it emerged this month that he had hired an adviser, Citigroup, to look at potential bids.

As often happens in a country where a fifth of major family-owned firms are run by someone in their 70s, events can conspire quickly against elderly entrepreneurs struggling in the twilight of life to pull off a deal that will safeguard their legacy.

In the case of Caprotti, a sharp-tongued workaholic who sports a reinforced Esselunga yellow plastic bag as his briefcase, ill health could complicate matters.

In recent days, Caprotti has taken gravely ill, said two people close to the situation. Until then, he had been actively working from his home, close to Milan's La Scala opera house.

"Caprotti has personally followed the negotiations up until now, even though his health is not good," another source said.


Caprotti stepped down as Esselunga chairman in 2011, left all executive roles in 2013 and has not been seen at Esselunga's headquarters on the outskirts of Milan for the past year.

But he has remained involved in day-to-day management and no major decision is taken without his blessing, sources said.

"If you send him an sms, he will reply in a nanosecond," said a person who works with him.

A deal is uncertain, complicated not only by Caprotti's poor health but also by a bitter legal dispute between him and two of his three children over ownership of the group.

A person familiar with Caprotti's thinking said he wanted to ensure the Esselunga business, Italy's most profitable supermarket chain, did not become the battleground of potentially squabbling heirs.

His 55-year-old son Giuseppe, who climbed the ranks to become chief executive in 2002, was stripped of his powers in 2004 and left the group in 2005. He and his sister Violetta later took legal action against their father, alleging he had illegally taken shares from a trust in their name in 2011.

So far the courts have sided with the father, though a final appeal is pending.

Caprotti's other daughter from his second marriage, Marina, sits on the board of Esselunga.

Giuseppe Caprotti told Reuters he has always opposed a sale of Esselunga but did not want to comment further on the issue. Under Italian law, he and Violetta could claim around 33 percent of their father's estate upon his death. By law, the father cannot disinherit them.


Bernardo Caprotti refuses to sell out to rivals, fearing the chain would vanish overnight.

He has long accused its Coop rivals of blocking his group's expansion out of its northern stronghold, thanks to their links to centre-left politicians, a charge the Coop businesses firmly reject. Esselunga has only just set up its first superstore in the capital, Rome, expected to open next month.

Caprotti is viscerally attached to the company, having built it from scratch to post sales of 7.3 billion euros in 2015, a rise of 4.3 percent, a growth rate nearly double the sector average.

According to a study by Mediobanca, Esselunga's revenue per square metre is more than three times that of rivals Carrefour and Auchan in Italy, and more than twice that of the dominant player in the country - the "Coop" or cooperative supermarkets.

However Caprotti has his critics.

He runs the group like a family patriarch and has not groomed a successor among its managers, according to three former senior company officials who say they quit out of frustration that they could only do things his way.

"It's a cultural problem. In Italy a company is seen as an extension of its founder, not as a separate entity," said Guido Corbetta, a professor at Milan's Bocconi University and an expert on family owned businesses. ($1 = 0.8925 euros) (Additional reporting by Pamela Barbaglia in London, Valentina Za in Milan, Francesca Piscioneri in Rome; Editing by Mark Bendeich and Anna Willard)

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