By and  on November 17, 2005

MILAN — After delisting its shares four years ago, Safilo is returning to the stock market and becoming Italy's newest blue chip.

Safilo is offering investors 140 million shares plus another 16.8 million shares through a Greenshoe overallotment option, putting 55.3 percent of the company on the block. If the shares are sold at the maximum end of the price range, at 7 euros per share, or $8.19 at current exchange rates, and the Greenshoe is fully exercised, the offer will generate 1.1 billion euros, or $1.3 billion, in cash, which will benefit the coffers of both Safilo and its shareholder, Credit Suisse First Boston Private Equity.

"We are doing this primarily to reduce debts," chairman Vittorio Tabacchi said at a press conference outlining details of the offer. "And by reducing our debts we will have the financial means to expand [the business]."

The offer runs Nov. 21 through Dec. 2, at which point the final price of the shares will be established. Trade will commence on the Milan stock exchange on Dec. 9. The company will have a market capitalization ranging from 1.4 billion euros, or $1.6 billion, to nearly 2 billion euros, or $2.3 billion.

Merrill Lynch International, Banca IMI SpA and UniCredit Banca Mobiliare SpA are coordinating the offer.

Safilo was founded in 1934 in Pieve di Cadore, a valley town that makes up part of the historic Belluno eyewear district in northeastern Italy. It is the second-largest eyewear maker in Italy after rival Luxottica, and claims a 43 percent share of the market for "high-end" eyewear retailing at upward of 100 euros, or $117. Through licensing deals, it manufactures eyewear for a series of fashion brands, including Gucci, Dior, Giorgio Armani, Polo Ralph Lauren and Valentino.

Earlier this month, Safilo inked a seven-year licensing deal with Hugo Boss for Boss and Hugo branded eyewear, which Roberto Vedovotto, chief executive officer of Safilo Group, estimated will generate 50 million euros, or $58.5 million, in revenue in 2007. He said Safilo is negotiating with other brands in the hopes of striking more licensing deals, but he declined to elaborate.

Vedovotto also noted swift sales of brands like Giorgio Armani, Marc Jacobs and Louis Vuitton, for which Safilo produced a capsule collection. The ceo said Safilo stands apart from competitors in terms of research and innovative product development."No one else in our industry is able to make a product like this," he said, holding up a pair of Louis Vuitton sunglasses with crystal-studded arms.

Executives touted that Safilo has seen its revenue grow at an average rate of 9.1 percent each year between 2002 and 2004. In the first nine months of the year, net profits more than tripled to 16.6 million euros, or $20.9 million, while sales rose 8.8 percent to 776.8 million euros, or $978.8 million.

The only full-year 2005 forecast Vedovotto gave was one for earnings before interest, taxes, depreciation and amortization to rise about 12 percent to 165 million euros, or $193 million.

Dollar figures have been converted from the euro at average exchange rates for the period to which they refer.

The company first listed shares on the Milan Stock Exchange in 1987, but Safilo became a privately held company 14 years later when Tabacchi bought out his two brothers' stakes in an operation that delisted Safilo in 2001. A year and a half later, Credit Suisse First Boston Private Equity injected $276.6 million into the company.

The buyout also generated sizable debts at the company. Net financial debt stood at 811.5 million euros, or $947 million, at the end of 2004, and the company expects the debt level to drop to about 400 million euros, or $467 million, after a planned capital increase that will generate some of the shares for the offer.

The share offer will generate as much as 1.1 billion euros, or $1.3 billion at current rates. Credit Suisse First Boston, which owns nearly 45 percent of Safilo, will be the biggest beneficiary of that windfall. It's offering 71.8 million shares and its stake in a publicly traded Safilo will drop to about 6 percent. Safilo said its proceeds from the offer should come in between 293 million euros, or $342.8 million, and 431 million euros, or $504.3 million.

Post-offer, the Tabacchi family's stake in Safilo will drop to about 38 percent from a current stake of 55 percent. All the same, Tabacchi and Vedovotto brushed off any potential concerns that Safilo could become a takeover target.

"I'm not worried," said Tabacchi.Company executives outlined a few strategic priorities for the future, including the development of its in-house brands Safilo, Oxydo, Blue Bay, Carrera and Smith; expanding distribution into new markets like China, India and Russia, and boosting efficiencies at the production and management levels.

Meanwhile, speculation is mounting that fashion companies such as LVMH Moët Hennessy Louis Vuitton and Giorgio Armani will snap up Safilo shares during the offer.

A spokesman for LVMH declined to comment on whether the company intends to buy a stake in Safilo, but sources said the company may buy a small minority stake of no more than 3 percent to solidify its partnership with the firm.

Giorgio Armani issued a brief statement a couple of months ago saying it would study the terms of an eventual Safilo offer. The designer still owns a 5 percent stake in his former eyewear licensee, Luxottica, and the company isn't disclosing whether he intends to sell it.

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