MILAN — Moncler SpA has decided to pull the plug on its initial public offering.
The Italian outerwear brand said it signed an agreement with Paris-based investment company Eurazeo to sell a 45 percent stake for 418 million euros, or $611.5 million at current exchange rates, and postpone a listing on the Milan Stock Exchange, which had been planned to take place by the end of June.
The transaction values the company at 1.2 billion euros, or $1.76 billion, representing a multiple of 12 times earnings before interest, taxes, depreciation and amortization, or EBITDA, last year.
Moncler said it believed the sale to Eurazeo was “the best way to pursue the growth of the group and enhance the value of its brands to enter the bourse in the future.”
Remo Ruffini, Moncler’s chairman and creative director, retains a 32 percent stake, and will remain chairman of the board, while The Carlyle Group owns 17.8 percent.
Prior to the Eurazeo deal, Carlyle and Ruffini held 48 percent and 38 percent, respectively.
The sale to Eurazeo is expected to close in the third quarter.
A Milan-based luxury goods analyst who requested anonymity said the shelved IPO hinged on pricing. “The timing for a listing was positive, given market conditions, but pricing was a problem,” said the analyst, pointing to the fact that a private equity fund was the majority shareholder and it wanted to cash out through the listing. “Whenever an IPO is seen as a means for an equity fund to exit its investment, there is always a lot of pressure on the price, while it’s a totally different scenario if the listing takes place after a capital increase and the money remains in the company.
“Investors are more careful about paying the price determined by a private equity fund because the latter wants maximum capital gain, and the money is seen going towards the fund and not to the company,” the analyst said.
He added that Carlyle was aiming for a multiple of 12 times Moncler’s expected 2011 EBITDA, while the market was looking at nine or 10 times that figure. In 2010, Moncler’s EBITDA rose 32.4 percent to 102.1 million euros, or $134.7 million, at average exchange rates.
During a conference call Monday to discuss the deal, Eurazeo chief executive officer Patrick Sayer said the company has had its eye on the luxury sector “for quite some time,” and first looked at Moncler in 2008.
Sayer said this was “a significant investment we are proud of.” When asked about the IPO, he responded that “while there is a strong appetite [for Moncler] and recognition of its management team, the financial market did not allow to price the company at the value they were ready to sell. This is a better alternative to an IPO at this stage, but it’s not off the table completely and it could be a possible exit.”
Sayer said Moncler had “a strong ambition to develop, while remaining independent from luxury groups.” Pressed for details on future developments, Sayer said Eurazeo, as an investment company with a long-term target and a business plan of four to six years, was in “no exit mood at all.”
Only last week, Moncler got the green light to proceed with its IPO on the Milan Stock Exchange, and sources said Banca IMI-Intesa Sanpaolo Group valued the company at 1.28 billion euros, or $1.87 billion at current exchange. Moncler was expected to float more than 50 percent of the company by the end of the month. Banca IMI, BofA Merrill Lynch and Morgan Stanley International were tapped to act as global coordinators and Banca IMI was to be in charge of the IPO and act as sponsor.
“The objective is what matters, to provide the company with the means necessary to further finance its development,” said Intercorporate vice president Armando Branchini. “You can do this through a private transaction or through an IPO. An IPO is not a goal, it’s a means.”
Sayer trumpeted the worldwide reputation of Europe’s luxury players in general, and touted Moncler’s “tremendous” growth opportunities in China and the U.S., where it is underrepresented, with only four stores, for example. Russia and Korea are also areas with strong growth potential, said the company.
Virginie Morgon, Eurazeo’s director of investments, said the equity fund was also attracted to the fact that Moncler has yet to develop its retail channel, with its 79 directly operated stores pulling in less than a quarter of total revenues. The plan is to increase the retail share to 50 percent in the midterm. Moncler opened 15 to 17 stores a year over the last two years, and Eurazeo plans to “slightly increase the number of annual openings,” said Morgon. “There are a lot of openings in the pipeline this year in Asia and Europe,” including a deeper penetration in France, which is underdeveloped compared with Italy or Germany. Moncler has 55 directly operated stores globally.
In its presentation, Eurazeo said Moncler is a unique company offering significant growth potential as it is an iconic brand with global appeal and a strong heritage in France, with an “experienced and talented management” team led by Ruffini, and is a highly profitable and cash-generative company with solid growth prospects.
Founded in 2007, Eurazeo holds an 85 percent stake in car rental service Europcar and lists investments in hotel operator Accor; cosmetics firm Intercos, and private bank Gruppo Banca Leonardo, among others. “Luxury is an attractive sector for Eurazeo and complementary to its portfolio,” said the presentation.
Moncler has four lines ranging from accessible luxury, with the main and Grenoble collection, to exclusive luxury, with Gamme Rouge for women and Gamme Bleu for men, designed by Giambattista Valli and Thom Browne, respectively. Morgon said the company was looking at further diversifying the group’s product offering. She also noted that the luxury outerwear segment has been outpacing the buoyant luxury sector, and that Moncler’s inroads with men’s wear, which accounts for 45 percent of sales, are a crucial factor for penetrating the Asian market. At present, Moncler’s business is concentrated in Italy, Germany and Japan.
Another goal is to rebalance sales between Moncler and the other brands in the Moncler group, since the brand has a more substantial impact on margins. “We want to strengthen the entire portfolio of brands, and fully exploit the potential of the other brands in the short term,” said Morgon.
The group also operates high-end sportswear labels Henry Cotton’s, Marina Yachting and Coast Weber Ahaus and holds the license for Cerruti 1881, which together, generate sales of almost 150 million euros, or $219.4 million. Last year, the Moncler line registered sales of 278 million euros, or $367 million.
In 2010, Moncler Group reported a 47.9 percent increase in net profits to 52.2 million euros, or $68.9 million at average exchange rates, on revenues that rose 14.8 percent to 428.7 million euros, or $565.8 million, in the fiscal year ended Dec. 31. Its net debt stood at 142.7 million euros, or $188.3 million, at the end of December.
Ruffini acquired Moncler in 2003 and evolved the brand from a collection of utilitarian, down-filled apparel with mostly local distribution into a fashionable, international label and, to further sustain expansion, sold a 48 percent stake in the company to Carlyle in 2008.