MILAN — Aeffe SpA kicked off its initial public offering Monday, seeking to jump-start international expansion across several of its luxury brands.
The Aeffe offer ends a dry spell of several years for fashion IPOs in Italy and may serve as an industry bellwether, gauging investors' appetites for luxury goods and fashion ahead of more potential IPOs. Several companies, including Prada SpA, Gianni Versace SpA and Salvatore Ferragamo SpA are contemplating going public. Jeweler Damiani SpA is next in line to list in Milan. It is waiting for the green light from Italian stock market regulator Consob.
Aeffe is selling as much as 37.26 percent of its capital in the IPO, which runs through July 18. The offer price range gives the company a theoretical market capitalization between 440.23 million euros, or $599.42 million at current exchange, and 579.82 million euros, or $789.48 million.
Company chairman Massimo Ferretti said Monday that Aeffe will use the funds generated to fuel future growth, especially in areas such as accessories and beauty. Ferretti and his sister, designer Alberta Ferretti, control 100 percent of the company, which owns the Alberta Ferretti, Moschino and Pollini labels. Aeffe also manufactures and distributes collections for Jean Paul Gaultier through a licensing pact.
Speaking at a news conference to begin Aeffe's road show, Massimo Ferretti said the company has several projects in the pipeline, including:
-- New Alberta Ferretti stores in New York and Los Angeles.
-- Licensing deals for eyewear and fragrances for Alberta Ferretti.
-- New Moschino stores in Paris, Madrid and New York.
-- Opening 40 Moschino stores in China during the next 10 years through a new franchising agreement with Hembly International Holding Ltd.
-- Leveraging the know-how at Pollini to better develop accessories for Alberta Ferretti.
Massimo Ferretti said Aeffe is going public because the company wants to raise its worldwide profile, cut debt and have the financial leverage to make acquisitions.
"All of these things lead us to a single goal, which is to become an increasingly important player within the world's market for luxury goods," Ferretti said.Aeffe is offering as many as 34.8 million shares. There is an option for a maximum of another 5.2 million shares in case of heavy demand. The price range runs from 4.1 euros, or $5.60, a share to 5.4 euros, or $7.40, a share. The definitive price will be established July 18, the last day of the offering.
Aeffe shares will start trading on the Milan stock exchange July 24. Aeffe is listing on the STAR segment, which targets smaller companies with a market capitalization of less than 1 billion euros, or $1.36 billion.
If demand is brisk and the offer is fully subscribed at the maximum price, Aeffe's IPO could generate as much as 187.92 million euros, or $255.87 million. The greenshoe overallotment option would contribute a further 28.08 million euros, or $38.23 million.
Mediobanca and Merrill Lynch International are coordinating the offer.
Gianluca Pacini, an analyst with Intesa SanPaolo, said the lower part of the IPO price range is reasonable in terms of Aeffe's financial forecasts.
"I would not pay more than 4.55 euros [or $6.20] per share," he said.
In May, Aeffe said its first-quarter net profit rose 77.3 percent to 5 million euros, or $6.6 million. Double-digit sales increases in ready-to-wear, and accessories pushed revenue up 12 percent to 87.1 million euros, or $114.1 million.
Aeffe general manager and chief financial officer Marcello Tassinari said Monday that the company expects to post full-year sales growth in line with that of the first quarter. He specified that spring-summer wholesale orders rose 16 percent and those for fall-winter are up 12 percent.
Tassinari also said Aeffe's profit margins for the coming years should benefit as the company grows and becomes more efficient in terms of production cycles.
Executives said Aeffe should continue to register annual sales growth of between 10 and 12 percent over the next three years. Last year, the company's revenue advanced 10.1 percent to 275.1 million euros, or $346.6 million at average exchange for the period. They also forecast that the company's gross operating margin would come in at about 16 percent of sales this year, rising to 20 percent in 2009.Moschino is the group's largest brand by far, accounting for 43.4 percent of Aeffe's first-quarter sales. Alberta Ferretti generated 22.2 percent of the total and Pollini made up 17.3 percent of sales. Jean Paul Gaultier accounted for 10.3 percent.
Wholesale sales comprise most of the business. In full-year 2006, they rose 10.3 percent to comprise 70.3 percent of Aeffe's revenue. Retail sales advanced 16.2 percent last year to account for 24.9 percent of the total.
Aeffe has a network of 149 monobrand stores, of which 75 are directly owned and 74 are run through franchising agreements. The company plans to open about eight to 10 directly operated stores and 55 franchised stores over the next five years, executives said.
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