By and  on December 15, 2010

MILAN — Christmas clearly comes more than once a year for Diego Della Valle, chairman of Tod’s SpA.

Having already made a paper profit of more than $180 million on his investment in Saks Inc., Della Valle, along with his brother Andrea, has just received more than $300 million from the sale of 10 percent of Tod’s shares. The brothers had asked Italy’s merchant bank Mediobanca to place just over three million shares of the luxury goods group on the market, which amounts to about 10 percent of Tod’s capital.

Italy’s Bourse said Wednesday that Mediobanca completed the operation at the price of 76 euros, or $101.90 at current exchange, a share, through an accelerated book-building offer. The operation netted the Della Valle brothers 232.5 million euros, or $311.7 million at current exchange.

The Della Valle family remains the company’s largest shareholder after the placement, retaining almost 58 percent of the Italian firm, parent to the Tod’s, Hogan, Fay and Roger Vivier brands. Andrea Della Valle is vice chairman of the group.

“We have been receiving indications from the market for some time to increase the liquidity of our shares in order to facilitate the investments of primary investors, who are often limited by a restricted free float,” said Diego Della Valle. “We have therefore tried to follow the investors’ requests, even if this means we have had to temporarily sacrifice the value of our investment.”

Della Valle touted the company’s “good performances” and the interest it generates in the financial markets.

The entrepreneur also noted that the sale precedes Tod’s entrance in the FTSE MIB index, the primary benchmark index for the Italian equity market, on Dec. 20, and expressed “regret that many investors were not able to buy the shares, since the demand was higher than the offer.”

Gianluca Pacini, luxury goods analyst at Intesa Sanpaolo, said the FTSE MIB index “allows greater visibility with those investors that manage larger portfolios.” Also, Pacini explained that a greater liquidity allows “faster negotiations,” which is an added value for investors.

The company detailed the sale of the shares: The entrepreneur’s vehicle Diego Della Valle & C. S.a.p.a. sold 6.08 percent, and Diego and Andrea Della Valle each sold 1.96 percent of the group’s share capital. The settlement is expected on Dec. 20.

As a result, the free float increased from about 33 percent to about 43 percent of the firm’s total outstanding shares.

“This was a well-thought-out placement, built deliberately, one that Della Valle must have had on his mind for a long time,” said a luxury goods analyst who spoke on condition of anonymity and who compared this placement to a similar one in 2002. “In April that year, Della Valle sold almost 10 percent of his shares, at 53 euros [$50 at average exchange], the historical peak at the time, a price that was recovered only at the end of 2006. He is extremely savvy, he knows how to build his company, but has also a razor-sharp financial mind,” the analyst said.

On Tuesday, Tod’s shares closed at 84 euros, or $112.60 —another record high.

In addition to this latest placement, in October Tod’s distributed an extra dividend of 3.50 euros, or $4.60 at current exchange, a share, for a total amount of 107.1 million euros, or $143.6 million, so the analyst calculated that Della Valle secured about 70 million euros, or $93.8 million, pretax, to further bolster his bank balance.

His wealth was even further boosted last month when Della Valle, whose family bought Tod’s Tokyo Omotesando headquarters and store in 2005 and then rented out the spaces to the company, cashed in on this investment. Tod’s bought the venue from Della Valle for 63 million euros, or $84.4 million.

“Where will all this money be channeled into? This is the real question,” said the analyst. “Yes, it could be into Saks, but let’s not forget that Della Valle has diversified his business interests between the [high-speed] train venture with [Ferrari president] Luca di Montezemolo, [eyewear maker] Marcolin, [motorcycle firm] Piaggio and [iconic coffee-machine maker] Bialetti.”

Della Valle initially took 5.9 percent of Saks Inc. in 2009, and in October, he raised his stake to 19.1 percent, becoming its largest shareholder. Based on Saks’ closing share price of $11.45 on Wednesday, Della Valle’s investments in Saks — totaling $170.3 million for 30.7 million shares — are now worth $350.9 million, translating into a profit-on-paper of $180.6 million.

The entrepreneur also has personal investments that include RCS MediaGroup, which owns the newspaper Corriere della Sera; furniture producer Poltrona Frau; film studio Cinecittà, and the city of Florence’s soccer team, Fiorentina.

Citigroup senior equity analyst Thomas Chauvet said the Tod’s share sale was “not a major surprise,” as Della Valle had “suggested in recent years his desire to increase liquidity of the stock,” and that the brothers had raised their stake in 2008 and 2009 “at an average price of 38.1 euros [ $51].”

Also, Chauvet noted that Della Valle “might be looking at investment opportunities outside of the family business.” Chauvet continued: “According to the 13-D filing from 21 Oct. 2010 [regarding Saks Inc.], Diego Della Valle acquired the shares for investment purposes,” but he may “change plans and intentions at any time,” including acquiring additional securities or becoming strategic and long-term shareholders of SKS (and seeking board representation), among other possible actions.” Although he has been reserved about his future intentions at Saks, Della Valle has indicated he might seek representation on the company’s board.

On Wednesday, Tod’s shares closed at 76.51 euros, or $102.60, down 8.92 percent.

“The market balances itself out, and the price is in line,” said Pacini. “Given the number of shares that were placed, a balance price was found,” said a Milan-based analyst. “Automatically, the stock price adapted to the price of the bookbuilding.”

Tod’s has been forging ahead despite the economy. In the first nine months of the year, sales across all categories and markets helped lift the company’s earnings before interest, taxes, depreciation and amortization (EBITDA) 20.4 percent to 157.4 million euros, or $207.7 million at average exchange. Consolidated sales rose 8.9 percent to 609.1 million euros, or $804 million, in the nine months ended Sept. 30, compared to the same period last year. In particular, the Tod’s brand registered 15.5 percent growth in the third quarter, driven by the success of the fall-winter season.

This year, Della Valle emerged as an “ambassador” of Italy’s heritage and craftsmanship, bringing the country’s symbol of culture, the La Scala theater, to Asia and, subsequently, to Russia and the Middle East. In a unique partnership, he has agreed to contribute to support La Scala’s productions for a year and help promote its values globally.

Earlier this month, Della Valle offered to finance the restoration of one of Italy’s most grandiose monuments, the Colosseum, to the tune of 25 million euros, or $33.5 million. The entrepreneur is awaiting the approval of his proposal by the country’s Ministry of Culture.

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