310 7 Chain Structures and Control
The Wallenberg case. Chain structures and multiple voting-rights enabled the
Wallenberg family to control some 40% of the value of the companies listed on
the Stockholm stock exchange with a fraction of capital at the end of the 1990s.^4
The Agnelli case. In Italy, FIAT S.p.A is controlled by the Agnelli family.
Members of the Agnelli family have a stake in Fiat through a chain that begins
with a limited partnership called Giovanni Agnelli e C. S.a.p.az.^5 In May 2008, the
chain consisted of the following companies.
Giovanni Agnelli e C. S.a.p.az. owned shares of Istituto Finanziario Industriale
S.p.A. (IFI). IFI had issued ordinary shares and preference shares. All ordinary
shares were held by the limited partnership. The preference shares (which carried
only limited voting rights) were listed on the Italian Stock Exchange. IFI thus
functioned as a financial controlling holding company of the Agnelli Group but
had external investors.
IFI owned shares of IFIL Investments S.p.A. (IFIL). IFIL had issued ordinary
shares and savings shares (which carried no voting rights). Both classes of shares
were listed on the Italian Stock Exchange. IFI owned 69.99% of the ordinary
shares. IFIL was the main industrial holding company controlled by the Agnelli
Group. The risks of the Agnelli Group were mitigated through ownership of
4.99% of the savings shares of IFIL by IFI and through direct ownership of 3% of
the ordinary shares of IFIL by Giovanni Agnelli e C. S.a.p.az.
IFIL had holdings in several companies. Its most important investment was
Fiat. Fiat is a large conglomerate with a wide range of operations ranging from
automobiles to publishing. Like IFI and IFIL, Fiat had issued ordinary shares and
preferred shares (with limited voting rights). IFI owned 30.45% of the ordinary
shares and 30.09% of the preference shares of Fiat.
Giovanni Agnelli e C. S.a.p.az. could thus control Fiat through a chain of com-
panies, each with external non-controlling investors.
The Bouygues case. Chain structures cannot work as control enhancing mecha-
nisms and as a mechanism to reduce the funding needs of the firm unless there is a
chain of entity A controlling entity B, entity B controlling entity C, and so forth. If
the entity at the top loses control of other entities in the chain, the firm loses con-
trol of assets and is reduced in size. This can be illustrated by the Bouygues case.
Bouygues is one of the best-known groups in France. In the 1980s, members of
the founding Bouygues family had a relatively small stake in Bouygues SA. They
owned 100% of shares in SDCM, a private holding company. After a number of
transactions, Bouygues SA was controlled by members of the Bouygues family.
Typically, SDCM and Bouygues SA invested in a joint venture in which a
company controlled by SDCM owned the majority of shares and votes. Bouygues
SA’s interest in the joint venture was divided into a direct stake (shares in the joint
venture) and an indirect stake (a minority stake in the company controlled by
SDCM). Although Bouygues SA had a larger overall economic interest in the joint
venture, the joint venture was controlled by the Bouygues family. This model was
(^4) See Sweden’s enduring business dynasty, The Economist, October 2006. See also figure
4–96 of the Institutional Shareholder Services, ECGI and Shearman & Sterling report.
(^5) See, for example, Dynasty calls, The Economist, May 2008.