MILAN (Reuters) - Italian luxury goods maker Tod’s (TOD.MI) said it had agreed to buy from its biggest shareholder the prestigious Roger Vivier shoe brand for 415 million euros ($440 million), a price some analysts said looked expensive.
Tod’s, controlled by Italy’s Della Valle family, currently produces and sells Roger Vivier shoes in return for royalty payments under a licensing agreement due for renewal next year.
The French brand, famous for its buckled shoes that can sell for more than 1,000 euros a pair, contributes 15 percent of the Italian group’s sales and Tod’s had previously said it would either renew the license or buy the trademark from the Della Valle family.
The family will reinvest half of the proceeds from the sale in a reserved rights issue at Tod’s to help it pay for the purchase, but Italian broker Equita said the deal’s price tag exceeded the net present value of the royalties and cut its price target on Tod’s shares to 71.5 euros from 76 euros.
A source close to the deal, however, said that royalty payments would have risen if the license had been renegotiated.
Shares in Tod’s recovered initial losses of more than 3 percent to close up 0.5 percent at 79.5 euros. They have gained 10 percent this year but are well below a 2015 high of 98 euros hit in August.
Under the deal Gousson, a company controlled by Tod’s Chairman and Chief Executive Diego della Valle and his brother Andrea, will invest 207.5 million euros in buying new Tod’s shares at a price of 83.53 euros each.
“The Della Valle family is reinvesting in Tod’s, but at a depressed valuation,” Exane BNP Paribas analysts said in a note, judging the deal “very expensive.”
Still, Tod’s could ill afford to lose a brand that lifts its overall profitability: core profit at Roger Vivier is estimated to represent just below 30 percent of sales against a 20 percent core profit margin for Tod’s.
As a result of the deal, Diego Della Valle’s stake in Tod’s will rise to 60.7 percent from 57.5 percent, the company said.
Italian investment bank Mediobanca advised the Della Valle family while UniCredit advised the board of Tod’s. Independent board members were advised by Citigroup. A shareholder meeting will be held in January to approve the deal.
Editing by Greg Mahlich and Susan Fenton