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Prada IPO Banks Estimate Luxury Maker May Be Worth as Much as $16 Billion

Prada SpA, the Italian luxury goods company planning an initial public offering, may be worth as much as 11 billion euros ($15.5 billion), according to Mizuho Financial Group Inc., which is helping to manage the sale.

The maker of Miu Miu bags should command a minimum valuation of 8.3 billion euros, according to a note obtained by Bloomberg News. Separately, Intesa Sanpaolo SpA (ISP), one of four banks leading the IPO, estimated that Prada may be valued at as much as 10.7 billion euros, according to a note sent to clients.

Prada, which plans to hold a Hong Kong IPO next month, is seeking to tap local funds as individual investors bet on the luxury-goods industry’s growth in Asia. A valuation exceeding 10 billion euros “may be too expensive,” according to Lorenzo Crispoltoni, a senior fund manager at Banca Fideuram SpA. Prada merits a higher stock rating than peers because of its larger scale and stronger global standing, Mizuho analysts said.

Intesa Sanpaolo, Credit Agricole SA’s CLSA Asia-Pacific Markets, Goldman Sachs Group Inc. (GS) and UniCredit SpA (UCG) are managing the IPO. Mizuho and Industrial & Commercial Bank of China Ltd. are providing assistance as so-called joint leads, according to three people familiar with the sale.

Calls to ICBC’s Hong Kong office and Mizuho’s Tokyo office weren’t answered outside business hours.

The Mizuho estimates are based on multiples of 23 times 2012 earnings for the higher valuation and 22 times 2011 earnings for the lower amount, according to the note, both exceeding the median for European and U.S. luxury peers.

Net Debt

Intesa’s valuation is based on 2012 earnings estimates, and about 21 times profit. That would be in line with the average of a peer group including LVMH Moet Hennessy Louis Vuitton SA (MC) and Tiffany & Co. (TIF) as calculated by Intesa based on May 13 prices.

Crispoltoni said it’s unclear how the banks accounted for the potential effect of currency shifts in the estimates.

A Prada spokesman declined to comment on the valuation.

Milan-based Prada plans to sell a stake representing about 16.5 percent of the company. In an IPO, shares are typically sold at a discount to so-called fair value to ensure the stock rises in its debut. Based on Mizuho’s estimates, the sale may fetch as much as 1.8 billion euros if a discount isn’t applied.

The maker of clothing and accessories, whose brands include Prada, Church’s and Car Shoe, still has significant scope to expand its retail store network and improve its operating margin compared with peers, the Mizuho analysts said.

Prada, which said in March it had net borrowings of 408.6 million euros, will be debt free by 2014, Goldman Sachs estimated in a separate report obtained by Bloomberg News.

Net income may rise to as much as 503 million euros in 2012 from 381 million euros this year, Intesa Sanpaolo estimates.

Profit more than doubled to 250.8 million euros last year on growth in the Asia-Pacific region, where sales jumped 63 percent, Prada said March 28. Total revenue rose 31 percent to 2.05 billion euros. Prada has 326 directly operated stores.

To contact the reporters on this story: Zijing Wu in London at zwu17@bloomberg.net; Elisa Martinuzzi at emartinuzzi@bloomberg.net; Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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