Most Recent Articles In Financial
Latest Financial Articles
- Chico’s Net Income and Sales Drop in First Quarter
- Sears Widens Q1 Loss; Explores House Brand Expansion to Others
- Europe’s Stock Markets Make Modest Gains
More Articles By
MILAN — After flirting with the stock market for the last seven years, Prada SpA said Wednesday that it is set to launch an initial public offering in 2008.
This story first appeared in the December 20, 2007 issue of WWD. Subscribe Today.
Depending on market conditions, a spokesman for the Italian luxury goods group said the listing on the Milan Stock Exchange is planned for next year, but there had been no decision on how much of the company would be floated. A source close to the deal suggested the move would likely be made in the second half, and that a 30 to 40 percent chunk would go public.
Industry sources valued Prada at 4 billion to 5 billion euros, or $5.76 billion to $7.2 billion at current exchange.
Prada’s earnings before interest, taxes, depreciation and amortization for the six months ended July 31 rose 40 percent to 140 million euros, or $187.6 million at average exchange rates for the period. Sales in the half grew 18 percent to 811.5 million euros, or $1.09 billion.
“We are heading towards a new era in the company’s history, with solid development potential on the basis of strong momentum, already shown by our results in the first semester of 2007,” chief executive officer Patrizio Bertelli said in a statement.
The company, which owns the Prada, Miu Miu, Car Shoe and Church’s brands, confirmed the appointment of Italy’s Intesa Sanpaolo SpA and UniCredit SpA — two of its top lenders — and Goldman Sachs & Co. as global coordinators and joint book runners in the institutional placement. Intesa owns a 5 percent stake in Prada SpA.
Prada has pulled the plug on its IPO three times, citing unfavorable market conditions. But the Prada spokesman said the company was in “perfect condition” to list next year, referencing a track record of solid sales and EBITDA growth over the last three years and a strong internal management team. He added that Prada sales were in line to grow 20 percent in 2007.
The market flotation would allow the debt-ridden company to expand its retail network, the spokesman said. Prada lacks stores in some key European cities, such as Barcelona, and has none in India and Mexico. In the U.S., the spokesman said the company has a limited network compared with competitor Salvatore Ferragamo SpA, which is planning its own IPO next year.
A Milan-based consultant said Prada SpA’s net debt of about 500 million euros, or $720 million, was unlikely to be a motive for the IPO given the company’s recent EBITDA figures, but that Banca Intesa might want to liquidate some of its 5 percent investment.
“It could be a motivating factor,” he said.
The Prada family and Bertelli own 95 percent of Prada SpA through Prada Holding BV. The holding company has estimated debts of 600 million euros, or $864 million, bringing Prada group’s total debt to more than 1 billion euros, or $1.58 billion.
A London-based analyst said it was logical for Prada to look to the equity markets to expand if it had run out of funding, particularly in emerging markets where 90 percent of the world’s new millionaires are appearing. But from an economic perspective, it was a risky time to do so, in the face of a potential cyclical downturn.
A string of Italian luxury goods brands have gone public since the summer. Aeffe SpA, which controls the Alberta Ferretti, Moschino and Pollini brands, and produces collections for Jean Paul Gaultier, listed on the Milan Stock Exchange STAR segment for small companies in July. Jeweler Damiani SpA and luggage maker Piquadro SpA followed last month. All three are trading below their initial IPO prices.
A Ferragamo spokesman told WWD on Wednesday that there would be no developments on its proposed listing until “at least January.”
The stock market seems a more distant option for Gianni Versace SpA. Company ceo Giancarlo Di Risio said this week that an immediate listing was not necessary to support further growth, although he would not rule it out in the medium to long term.
For Bertelli, however, the time is right.
“In the past few years Prada successfully completed a reorganization which led to an increase in profitability and to a strengthened leadership position,” Bertelli said. “Now we look at the financial markets with efficient industrial processes and a strong and experienced management team.”
The company has refocused its management priorities on its core Prada and Miu Miu brands after selling off the underperforming Helmut Lang and Jil Sander in 2006 and Azzedine Alaïa this fall.
Prada has also bolstered its management ranks. In October, the company tapped former Gucci Group and Burberry executive Brian Blake as chief operating officer, a newly created role.
Also Wednesday, Prada said it has begun setting up the compliance committees required for a stock market listing. It has appointed Italian law firm Bonelli Erede Pappalardo as its legal adviser on the deal.