(Adds comments, background)
* Priced at HK$39.5/shr, bottom of narrowed range-sources
* Global market volatility weighs on IPO
* Prada valued at $13 bln; LVMH market cap of $80 bln
By Elzio Barreto, Elisa Anzolin and Gianluca Semeraro
HONG KONG/MILAN, June 17 Italian fashion house Prada SpA
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
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
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
A poor Hong Kong debut by luggage brand Samsonite International on
Thursday augured ill for Prada's offering, the biggest on the exchange so far
"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
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 and Hermes International SCA , 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 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 capitalisation of LVMH, $28.5 billion for Hermes and $21 billion
for PPR SA .
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
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
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
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
"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 has declined in 11 of the last 12
sessions, losing 7.6 percent, and world stocks 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 has posted a
Prada's listing was organised by Goldman Sachs , Credit Agricole's
CLSA brokerage and Italian banks UniCredit SpA and Intesa
Sanpaolo's Banca IMI unit, which are both represented on Prada's board.
($1 = 7.801 Hong Kong Dollars)
(Additional reporting by Antonella Ciancio, Astrid Wendlandt, Kylie MacLellan;
Editing by Denny Thomas, Dhara Ranasinghe and Will Waterman)