MILAN — Ferragamo Finanziaria SpA, which controls Salvatore Ferragamo SpA, has increased the Ferragamo family’s ownership in the Florence-based firm.
Minority shareholder Peter Woo, through his company Majestic Honour Ltd., has sold a 2 percent stake in the luxury house, cutting his holding to 6 percent. Woo has exercised a put option on more than 3.3 million shares at the price of 9 euros, or $13 at current exchange, corresponding to Ferragamo’s listing price, for a total of 30.3 million euros, or $43.5 million.
The put option was originally stipulated at the end of February and revised in mid-April. In March, Ferragamo Finanziaria sold 8 percent of Salvatore Ferragamo Italia SpA to Hong Kong businessman Woo and his family.
To strengthen the group’s presence in a key area of the luxury business, the company said it was planning to increase its equity interest in Ferragamo’s distribution companies based in Greater China, which will rise to a 75 percent stake from the current 50 percent (60 percent for Macau) in January 2013. The Woo family, who among other interests also owns the Lane Crawford Joyce Group, has been a partner of the group in Greater China for more than 20 years and helped distribute the brand in China, Hong Kong, Taiwan and Macau. China has now grown into Ferragamo’s largest market.
Following the transaction, which was revealed in a filing to the Bourse this week, Ferragamo Finanziaria holds a 58.24 percent stake in Ferragamo. Chairman Ferruccio Ferragamo explained during the road show that “[the Ferragamos are] selling a limited number of shares because the family is very, very interested in the company and wants to continue being involved.”
Also, in an Internal Dealing communication, the Bourse stated that Ferragamo chief executive officer Michele Norsa purchased 10,000 shares on July 12, priced at around 10 euros, or $14.30. for a total of 101,500 euros, or $145,885 at current exchange.
The fashion company made its debut on the Milan Stock Exchange on June 29, selling about 25 percent of its stock in a deal worth 379 million euros, or $545.2 million. Despite the instability of global markets, the company’s shares have since performed strongly, reaching a peak last week of 30 percent up from its initial public offering price of 9 euros, or $13. On Tuesday, two days shy of its first month on the market, Ferragamo shares closed up 4.17 percent at 12.50 euros, or $18.
Last week, Deustche Bank analysts initiated coverage with a “buy” rating and a target price of 12.50 euros, or $18, expecting growth in Ferragamo’s profitability over the next few months.
“Ferragamo offers one of the best company profiles with one of the lowest EBIT [earnings before interest and taxes] margins in the soft luxury world. We believe all the ingredients are in place and ready to be capitalized: the company needs to improve its store productivity by revitalizing the brand in Western markets, improving store attractiveness, and increasing efficiency of merchandising management,” stated the bank’s report. “The potential operating margin expansion of 5.4ppt, coupled with the buy-out of minorities, makes Ferragamo one of the most interesting bottom-line growth stories in our universe, offering an EPS CAGR in 2010-13E of 35 percent.”
In 2010,Ferragamo recorded sales of 782 million euros, or $1.03 billion at average exchange, and an EBIT margin of 11.1 percent.