Prada's $2.6 billion HK IPO values company above European peers
Italian fashion house Prada could raise up to $2.6 billion in an initial public offering in Hong Kong, setting a valuation for the maker of Miu Miu dresses higher than its European peers.
Prada set an indicative price range of HK$36.5 to HK$48 a share for the IPO as it started meetings with Asian investors to gauge appetite for the deal, a source with direct knowledge of the plans told Reuters on Monday.
The IPO is being priced at 27 times projected 2011 earnings at the top end of the range, the source said, in a deal largely aimed at funding expansion and renovation in Prada's fastest-growing market of the Asia Pacific.
The source declined to be identified because the details have not been made public.
Twenty-plus times PE looks expensive, said Peter Elston, strategist at Aberdeen Asset Management Asia. But luxury goods companies such as Prada have got good, visible top-line growth for the next 20 years. There are high barriers to entry as you can't go out and create a luxury brand from nothing.
In Singapore, about 60 investors and fund managers attended a lunchtime presentation by Prada's Chief Executive Patrizio Bertelli.
Some expressed concerns about the pricing.
There's no reason for it to trade higher than LVMH, which has a more diversified portfolio. Prada may be banking on the China story, but all the other luxury brands are also going into China and it's going to be very competitive and tough there, said one manager of a Singapore-based fund, who declined to be identified.
Prada, 95 percent owned by the families of Chief Executive Bertelli and his fashion designer wife Miuccia Prada, has shelved plans to go public three times over the last decade.
It is betting on a boom in the consumption of luxury items in China, the world's second-largest economy, to lure investors to the IPO, the first for an Italian company in Hong Kong.
China will account for 20 percent of the global luxury market by 2015, with spending in the country nearly tripling to $27 billion by that year from around $10 billion in 2009, consulting firm McKinsey & Co says.
The IPO is slated to be priced on June 17 and the shares will start trading in Hong Kong on June 24 under the symbol 1913, the year the company was founded in Milan.
Prada and shareholders Prada Holding BV and Intesa Sanpaolo
About 14 percent of the shares will be sold in a primary offering with proceeds going to Prada, with the remainder of proceeds going to Prada Holding and Intesa Sanpaolo.
HIGHER VALUATION
A projected price-to-earnings ratio of 27 times compares with an average P/E of 26.2 times for Hong Kong-listed luxury goods companies such as luxury menswear operator Trinity Trinity Ltd <0891.HK> and French skincare products retailer L'Occitane <0973.HK>, Goldman Sachs Research estimates.
British luxury goods group Burberry
Prada's IPO comes as a rout in commodity prices and debt concerns in the euro zone have eroded investor risk appetite, pushing global markets off their multi-year highs in early May.
On Sunday, startup mining company Resourcehouse Ltd abandoned its fourth attempt to go public in Hong Kong, citing deteriorating market conditions, a statement on its website said.
GROWTH COMPANY
Prada started its business in 1913, when Mario Prada began selling leather bags, trunks and silverware to the European elite from his store in Milan's Galleria Vittorio Emanuele II.
The company has since expanded throughout Europe, the United States and Asia with a product range that includes clothes, mobile telephones, fragrances and eyewear.
Revenue for the year ended January 2011 jumped 31 percent to 2.05 billion euros and profit more than doubled to 253.6 million euros.
Prada said in a Hong Kong filing on Friday it expected half-year profit to rise 46 percent as it expands in fast-growing Asia.
The company plans to add a net total of about 80 directly operated stores by the end of January 2012, most of them in the Asia Pacific region, its fastest growing market.
Goldman Sachs
($1=7.778 Hong Kong dollars)
(Additional reporting by Antonella Ciancio in Milan and Kevin Lim and Charmian Kok in Singapore; Editing by Vinu Pilakkott)
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