MILAN — Salvatore Ferragamo SpA said Wednesday that its initial public offering will take place on June 29 in a flotation that could value the company at more than $2.5 billion.
The Florence-based company will float about 25 percent of its stock on the Milan Stock Exchange. Chairman Ferruccio Ferragamo said the decision to list on the exchange was taken by the family “unanimously, to further develop [the luxury goods house] in the future with continuity and a strong managerial asset,” also in light of the ever-growing number of family members, now totaling 70.
“We are selling a limited number of shares because the family is very, very interested in the company and wants to continue being involved,” said Ferragamo during a presentation held at Mediobanca Banca di Credito Finanziario, global coordinator and joint book runner of the operation.
Responding to speculation circulating in Milan that the offer has already been entirely subscribed during the initial phase of the road show, which kicked off Monday and ends June 23, Mediobanca banker Francesco Spila said he could not comment but confirmed that the book building is “going very, very well, with demand from international and diversified investors in Europe, America and Asia.”
Ferragamo is offering shares ranging from 8 euros to 10.50 euros, or $11.60 to $15.20 at current exchange.
This would value the company at between 1.35 and 1.77 billion euros, or $1.96 billion to $2.58 billion, with 2010 earnings before interest, taxes, depreciation and amortization multiples calculated at between 12.5 and 16.2 times. The implied size of the deal ranges from 337 million to 442 million euros, or $486.6 million to $638.2 million, post-greenshoe, said Spila.
After the IPO, Ferragamo Finanziaria, controlled by the family, will hold 56 percent of Salvatore Ferragamo SpA; various members of the family and Hong Kong entrepreneur Peter Woo will hold 11 and 8 percent of the firm, respectively. There will be no capital increase for the listing. As per a prospectus distributed by the company, Wanda Ferragamo, who continued to grow the company after the death of her husband, Salvatore Ferragamo, in 1960, and her son Massimo resigned from the board on March 30.
Chief executive officer Michele Norsa said the company’s strategy in the period 2011-2013 is to consolidate its luxury positioning; expand its distribution in emerging markets and optimize its retail and wholesale performance globally; to elevate the product offering and collection, and to modernize its supply chain and organization.
Norsa highlighted the relevance of the Chinese market, where the company has 53 boutiques in 31 cities.
In light of Prada’s listing in Hong Kong expected on June 24, and responding to questions about opting for the Milan exchange, Ferragamo said he felt it would have been “a contradiction” to float in Hong Kong. “We analyzed this possibility a year ago, but we are all about being Made in Italy, it would have felt funny to have company certifications in Chinese,” explained Ferragamo. “We feel Italian and we believe we should remain here and support this beautiful country. Yes, there are advantages to a listing there, but we ruled it out a year ago, even before [Prada decided for a Hong Kong IPO].”
As for choosing to list at this time, Norsa said the company was “almost ready in 2008,” but put the project on hold when the markets fell sharply. Ferragamo first talked about going public in 2006, when it recruited Norsa. “Shareholders wanted to go ahead as soon as possible, we aimed at the first available window and this is the opportune moment,” said the executive. “We are proud to be part of Italy and hopefully will lead other companies to consider the Italian exchange.”
Given Moncler’s decision to halt its IPO process earlier this month and sell a 45 percent stake to investment company Eurazeo, when asked if the company would reconsider its listing, Ferragamo dismissed the idea. He conceded the firm “has been courted by funds, but [the IPO] is not about numbers. It’s about giving a direction for the future.” On the sidelines of the presentation, he added that his mother was “enthusiastic about the project. She really believes it will help add solidity to the company in the future.”
Norsa said the company was financially solid and not weighed down by debt, which at the end of last year amounted to 18.2 million euros, or $24 million, compared with 80 million euros, or $111.2 million, at the end of 2009.
And the company is capitalizing on its 2010 performance to go for an IPO. Lifted by gains in Asia and at retail, the group returned to the black in 2010, posting sales that hit the $1 billion mark. Revenues last year grew 26.1 percent to 781.6 million euros, or $1.03 billion at average exchange, boosted by Ferragamo’s direct retail network, which showed a 29.1 percent increase. Net profit totaled 60.8 million euros, or $80.2 million, compared with a loss of 14.7 million euros, or $20.4 million, in the previous year.
Norsa said he forecast the opening of 25 stores in 2011, of which 10 will be in China.
This year is showing further signs of improvement. In the first quarter ended March 31, sales gained 27.5 percent to 210.4 million euros, or $294.5 million. In particular, sales rose 31.5 percent in Europe, and 42.3 percent in the Asia-Pacific region, excluding Japan. EBITDA jumped 38.3 percent to 27.3 million euros, or $38.2 million.
Ferragamo said the company may issue a dividend of 40 or 50 percent of profit to shareholders at the end of the fiscal year. After the first leg in London and Milan, the road show will travel to the U.S. on June 21 and 22, to Boston and New York.