The storied Italian firm’s majority shareholder, Edizione Srl, is mulling a delisting of the company’s shares. Benetton shares were suspended on the Milan Stock Exchange on Tuesday after they rose 9.3 percent to 4.05 euros, or $5.32 at current exchange, in midday trading. Benetton, which went public in 1986, denied speculation that its shares had gained following rumors of a merger with Spain’s giant Inditex Group, owner of the Zara brand.
Edizione, controlled by the Benetton family, owns about 67 percent of the Benetton clothing and textile business, and is considering a tender offer to buy the remaining 33 percent. A statement is expected today.
Benetton has a market capitalization of about 680 million euros, or $891.5 million at current exchange, making the 33 percent stake outstanding worth about 224.4 million euros, or $294.2 million. Benetton represents a small part of Edizione’s overall holdings, which include highway catering, infrastructure, communications, real estate and agriculture.
Benetton has been battling changing consumer tastes, rising raw material costs and the weak economies of Europe, especially Italy, its largest market. The company’s shares fell to as low as 3 euros late last year, compared with a high of 15 euros in 2006. Benetton warned Tuesday that its profits for 2011 would be more than 30 percent below the 2010 level, with forecast net profits of 70 million euros, or $91.8 million at current exchange last year, compared with 102 million euros in 2010. Profits were hit by “significant increases” in raw material prices, the company said, predicting that profits in 2012 would remain under pressure.
“A delisting would mark a strong focus on business and the family’s engagement in expanding and developing the brand,” said Armando Branchini, deputy chairman of Milan luxury consultancy InterCorporate. “Shares never reflected the value of the company.
“It’s one more example of how listed companies such as Bulgari or Aeffe have been underestimated by the Italian Bourse, a financial market that is at times too provincial. It would be very convenient for the company to launch an offer now,” said Branchini, praising the financial experience, international vision and “no-frills and practical management skills” of executive deputy chairman Alessandro Benetton. He is the son of Benetton’s founder, Luciano Benetton.
Stefano Corneliani, senior analyst at Intermonte SIM, said he was not surprised by Edizione’s decision. “It was only a question of when, given the limited attention shares were getting on the market. They can bring back a major real estate asset, valued at about 1 billion euros [$1.31 billion], and its core business at a convenient price. The choices were either to spin off its real estate or buy off the minority shareholders. They are opting for the latter,” said Corneliani.
Another Milan-based luxury goods analyst, who requested anonymity, dismissed the consequences of Benetton’s delisting on the Milan Bourse for the Italian Stock Exchange, describing it as “a drop in the ocean. Although with different volumes, Brunello Cucinelli plans to list in the spring and will replace Benetton. We shouldn’t read anything particular into this. Given the cosmic pessimism and Italy being under exam because of its debt, M&As become attractive for anyone with liquidity.”
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