Italian luxury goods behemoth Prada has set tongues wagging with its multi-billion-dollar Hong Kong listing. Prada, whose brands include Miu Miu, Church’s and Car Shoe, is said by some bankers to justify a $SS15 billion-plus price tag because of its size, global reputation and strong growth outlook, particularly in Asia.
While we don’t yet know the valuation, supporters cite its 63% sales jump in the Asia-Pacific last year and 31% jump in revenue as signs of company that’s on the move, in the right direction.
While designer Miuccia Prada is better known than her husband Patrizio Bertelli, the company’s success suggest the couple know the secrets of working well with a spouse. The pair are said to have met at a trade fair in Milan in 1977, and then opened a store in the mid-1980s in New York, before expanding into women’s clothes and menswear.
That’s not to say there aren’t disagreements: Prada describes Bertilli in a Wall Street Journal interview as “far more of a provocateur” than she is, and has resisted his calls to focus more on marketing via Hollywood celebrities. “He is the mind, we are the arms,” she said in the interview, although others have complained he is a control freak with an explosive temper.
While the links between high-end fashion and BRW Rich lister Clive Palmer might not be immediately obvious, Prada and Palmer’s company Resourcehouse have at least another thing in common: they’ve both struggled to get an IPO off the ground. This is the fifth IPO attempt for Prada in the past decade. Palmer, who has delayed his float by just four days this week, has had three previous attempts at an IPO.
The 1990s were a busy time for Prada, with about $US500 million spent on nabbing small fashion houses. While the intent was clear, the debt load became a problem after the acquisition of Jil Sander, Helmut Lang and others, with the WSJ saying Prada has yet to live down the $1 billion-plus debt it had accrued by the end of the decade. Still, Goldman Sachs says the float means Prada will be debt-free by 2014, having at last count declared net borrowings of €408.6 million.
When Jimmy Choo was sold this week for more than £500 million pounds to the private luxury brands company Labelux, its Asian growth potential was highlighted. So it’s fitting that Prada’s mooted IPO should head to Hong Kong, home to some of the world’s biggest floats over the past couple of years, with the value of HK raisings last year exceeding those in the New York Stock Exchange and the Nasdaq. Some say Prada’s choice of Hong Kong – the first for an Italian company – symbolises the decline of Western economic might, in favour of Asia. “Companies want to face their future, not their past,” Sam Kendall, head of equity capital markets for Asia Pacific at UBS, told Bloomberg.
Aaron Fischer, head of consumer and gaming research at brokerage CLSA Asia-Pacific Markets, told the newswire that with Asia-Pacific markets accounting for most of the growth in luxury brands, and 50% of existing sales, it makes sense for companies to be close to their customers. The Prada move follows a $US840 million raising from French skin-care company L’Occitane Internationale SA, and comes ahead of a mooted HK listing by New York-listed handbag group Coach.
With estimates from banks behind the float valuing Prada at between €8.5 billion and €10.7 billion, it’s clear the float will deliver a fabulous windfall for Prada’s majority owners, with just 16.5% of the company to be sold in the IPO.
Chief executive Patrizio Bertelli and chairman Miuccia Prada, who currently hold around 95% of the business, will be diluted but could still hold a stake worth as much as $US10 billion.
No wonder they have been dubbed by the Wall Street Journal as the most successful husband-and-wife pairing in fashion. “Money is not an end for us, but I’ve always said that for all of this to work, we need to sell, and Bertelli feels the same way,” Prada said last year.
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