Milan—Ending months of delays and denials, Prada said in a statement today that its board voted to start the process of a public listing on the Hong Kong stock exchange.
While Prada didn’t specify a time frame for its IPO, Patrizio Bertelli, ceo, has said that the company’s strategy of worldwide expansion has given it strong revenues and profitability, putting the brand in a strong position to public.
If successful, the much-anticipated deal would make Prada the biggest European fashion brand to float in more than a decade and the first Italian company to be listed in Hong Kong. Prada has openly discussed going public in the past, but major events hindered the move. A first attempt to go public fizzled in the aftermath of the Sept. 11, 2001, terrorist attacks, and a more recent one was shelved when the Great Recession put a damper on international stock markets.
“Confident in the development of the group, we can now face the coming challenges with serenity and seize the best opportunities offered by the international capital markets,” Bertelli said in a statement.
Analysts said the company could reach a valuation of at least 7.5 billion euros (about $10.3 billion) based on current estimates if it sold shares in Hong Kong, compared with between 5 billion euros and 6 billion euros in Milan, an analyst reported to Bloomberg last week. The valuation could be at least 12 times projected 2011 core earnings, which be in line with the luxurygoods industry which is about 12.5 times.
Hong Kong IPO: Less Interest from US, EU investors?
While Prada may be able to obtain a higher valuation in Hong Kong than in Europe, some analysts said the company risks missing out on investor interest from Europe and the United States. “They will lose investors and coverage in Europe and the U.S.,” one Milan analyst told Reuters “But this is less of an issue for them as the amount of money they will be able to raise.”
“We do not like to see the quotation in Hong Kong as we believe an Italian company should be quoted in Italy,” analyst Rene Weber at Vontobel said. “It is clear that a big client/investor base is in Hong Kong, but these investors also invest in luxury goods stocks in Europe. Therefore we clearly do not see the reason for doing this.”
The 60-billion-euro Italian sector is under-represented on the stock market. Fashion houses such as Ferragamo and Moncler have also indicated they might float depending on market conditions. Nonetheless, others see Prada’s Hong Kong IPO as a strategic move. Armando Branchini, vice-president of Milan-based consulting firm Intercorporate, said: “Asian investors will consider the decision to list in Hong Kong as a kind of recognition of, and tribute to, the importance of the region.”
Reports said that Hong Kong bourse guidelines would require management changes, including establishing two executive administrators in Hong Kong and three independent administrators.
Prada is 95% owned by the families of Patrizio Bertelli and, Miuccia Prada his wife. Italian bank Intesa Sanpaolo owns the rest.
UniCredit, Intesa Sanpaolo–both sitting on the company’s board–along with Goldman Sachs and brokerage CLSA, a Hong Kong division of Credit Agricole Securities==have been appointed as global coordinators for its IPO, Prada said.