MILAN May 12 Italian luxury brands Prada and
Ferragamo look likely to wait for better market conditions to
list their shares, probably after the summer, financial sources
said, but competing timing could hurt their plans.
Both brands have said they plan to list this year and people
familiar with the matter said in November they were aiming for
initial public offerings (IPOs) in the second quarter.
But market turbulence and a falling dollar mean they are
likely to move back their plans, financial sources said.
Prada, whose designer Miuccia Prada specialises in
innovative fashions, has abandoned listing plans before and
faces a credibility problem if it doesn't go ahead this time,
fund managers said.
Its strengths are its rapid growth, territorial diversity
and the appeal of newer brand Miu Miu, repositioned to attract
wealthy younger clients.
The Milan fashion house "intends to wait for the half-year
which ends on July 31, and especially for the shows in July and
September, which will provide some visibility on revenues until
spring/summer 2009," one financial source said.
Ferragamo, best known for its scarves, ties and leather
shoes and bags, also seems to prefer to wait for better times.
"If the market continues to look more reassuring,
(Ferragamo) could list in the second part of the year," said a
source close to the operation. But its big exposure to the
dollar could cause it to wait.
North America sales accounted for 26.4 percent of
Ferragamo's revenues in 2007.
However, if Ferragamo goes head-to-head with Prada, fund
managers are likely to pick just one of them.
"If they list around the same time, I'm inclined to invest
only in one of the two," said one manager at a top Milan fund.
Luxury brands appear to be weathering the worst of global
financial storms as their customers are less crimped in spending
than average income earners.
But analysts are wary of predicting the sector could stage a
recovery just yet.
"You will only be able to say whether you are talking about
just a bounce or something more after the wave of quarterly
results coming up," said Elena Sottanella at Abaxbank.
ABOVE AVERAGE MULTIPLES
Advisers plan to position Ferragamo and Prada with multiples
"higher than the average of a wide basket, which would be around
nine times EBITDA ... multiples that look more like (France's)
Hermes (HRMS.PA), without the speculative boost," a market
The Prada IPO could be valued at up to 1.5 billion euros
($2.3 billion), depending on the size of offer, one market
"It could be 25 percent, with maybe another tranche in a
couple of years, or maybe more, say 35-40 percent straight away,
depending on the market," this source said.
Prada could either go for a sale of existing shares or
combine this with a capital increase -- but this would not be
more than 20 percent of the total offer.
For Ferragamo, the offer is again likely to be of existing
shares, a source close to the operation said. If it offered new
shares as well, it would be for a very small amount.
The Tuscany-based brand was looking at an enterprise value
of around 1.5-1.8 billion euros last year, but valuations have
changed a lot since then, the source said.
Sottanella calculates enterprise value/EBITDA ratios that
range from 6.94 for luxury shoe maker Tod's SpA (TOD.MI) to 18
for Hermes. Santander's Andrea Paladini has a range of eight for
jeweller Bulgari SpA BULG.MI to 16 for Switerland's Compagnie
Financiere Richemont SA CFR.VX.
Ferragamo's chief executive, Michele Norsa, was brought in
to oversee its listing. He has presided over a 34 percent jump
in net profit last year to 47 million euros, on sales that have
risen 6.5 percent to 687.4 million euros.
The company has picked Mediobanca and JP Morgan as global
coordinators and UBS as joint book-runner.
Prada considered an IPO in 2001 but this was derailed by
market turbulence after the 9/11 attacks. Since then it has put
off listing and turned instead to debt.
"If they put it off again, I won't believe them any more,"
said one fund manager.
Prada had net profit of 126.8 million euros in 2007, up 65.8
percent on sales which rose 18.8 percent to 1.66 billion euros.
It has picked UBM, Goldman Sachs and Intesa Sanpaolo for its
listing. Intesa has a stake in it through its Banca IMI unit.
(Writing by Jo Winterbottom, editing by Elizabeth Fullerton)