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LONDON - From ketchup to hot drinks, family-run investment firms are shaking up the consumer deals market, squeezing out private equity players and forcing them to change strategy.
BEIJING/HONG KONG - China reiterated its opposition on Thursday to a European Union plan to limit airline carbon dioxide emissions and called for talks to resolve the issue a day after its major airlines refused to pay any carbon costs under the new law.
Prada prices $2.1 billion HK IPO low in weak markets
HONG KONG/MILAN |
HONG KONG/MILAN (Reuters) - Italian fashion house Prada SpA (1913.HK) floated at the low end of its target price range on Friday, raising $2.1 billion as investors baulked at its rich valuation while global markets are weak.
The maker of luxury bags and Miu Miu dresses, which had originally hoped to raise as much as $2.6 billion, priced its initial public offering (IPO) at HK$39.50 a share, three sources with direct knowledge of the deal said on Friday.
Fund managers said that while luxury investors are used to paying more for high-end discretionary brands, Prada had to adapt its initial ambition due to market volatility.
A poor Hong Kong debut by luggage brand Samsonite International (1910.HK) on Thursday augured ill for Prada's offering, the biggest on the exchange so far this year.
"Luxury demand is very self explanatory, and it makes a lot of sense for companies like Samsonite and Prada to list in Hong Kong, but we're talking about quite a volatile market," said Selina Sia, head of consumer research at Mirae Asset.
Prada had set an indicative price range of HK$36.5 to HK$48 per share, before narrowing it to between HK$39.50 and HK$42.25 a share on Thursday.
At the top of its original range, Prada would trade at 27 times projected 2011 earnings, far higher than an average of 20.4 times for luxury retailers such as LVMH (LVMH.PA) and Hermes International SCA (HRMS.PA), according to Phillip Securities' forecasts.
At the revised guidance Prada would trade at a P/E of 22.8-24.4 times, more in line with global rivals.
Prada and shareholders Prada Holding BV and Intesa Sanpaolo (ISP.MI) sold 423.3 million shares in the offering, raising HK$16.72 billion ($2.14 billion), said the sources.
The IPO valued Prada at about $13 billion, compared with the nearly $80 billion market capitalization of LVMH, $28.5 billion for Hermes and $21 billion for PPR SA (PRTP.PA).
LUXURY DEMAND STRONG
Prada, set up in 1913 by Mario Prada as a business selling leather bags, trunks and silverware to the European elite, has become a global fashion empire, with 319 directly operated stores, a third of which are in Asia Pacific.
The move by retailers such as Prada to list in Hong Kong is part of a trend to raise brand awareness in China.
As part of the marketing for its offering, Prada hosted a fashion show for top fund managers, who jostled for space at the glitzy Grand Hyatt Hotel in Hong Kong to see Miuccia Prada's creations and hear about China's booming demand for luxury goods.
China's consumption of luxury goods is forecast to grow 18 percent annually to about $27.5 billion by 2015, from about $12.2 billion in 2010, according to consultancy McKinsey.
But some investors were concerned that Prada's growth targets -- it expects sales to rise more than 20 percent over the next three years if the global economy continues to improve -- were too ambitious.
"Prada is a very strong brand, but it has an aggressive growth strategy which looks more difficult to achieve in the current economic environment," said Scilla Huang Sun, who runs a luxury fund for Swiss and Global Asset management.
Despite volatile markets casting a cloud over Prada's offering, it was nevertheless nearly three times oversubscribed at the listing price, one source said.
Market uncertainty, which has also hit new listings in Europe this year, with more than 15 deals pulled and others performing poorly after their flotations, is expected to continue to affect offerings in Hong Kong in the short term.
"The market is going through a very difficult phase," said Philippe Espinasse, a former investment banker with Nomura and UBS in Hong Kong and author of "IPO: a Global Guide."
The benchmark Hang Seng Index .HSI has declined in 11 of the last 12 sessions, losing 7.6 percent, and world stocks .MIWD00000PUS hit a three-month low on Thursday, weighing on investor demand for new issues.
Of the larger IPOs in Asia this year, only MGM China (2282.HK) has posted a first-day gain.
Prada's listing was organized by Goldman Sachs (GS.N), Credit Agricole's (CAGR.PA) CLSA brokerage and Italian banks UniCredit SpA (CRDI.MI) and Intesa Sanpaolo's Banca IMI unit, which are both represented on Prada's board.
(Additional reporting by Antonella Ciancio, Astrid Wendlandt, Kylie MacLellan; Editing by Denny Thomas, Dhara Ranasinghe and Will Waterman)
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