Prada Leads Luxury Goods Makers Facing the Future With Hong Kong Listings
Prada Leads Luxury Brands Facing Future With HK Listings
Thomas Lee/Bloomberg
Shoppers stand in front of a Prada store on Canton Road in Hong Kong.
Shoppers stand in front of a Prada store on Canton Road in Hong Kong. Photographer: Thomas Lee/Bloomberg
May 19 (Bloomberg) -- Bloomberg's John Dawson reports on the outlook for a Prada SpA initial public offering. Prada, the Italian producer of Miu Miu bags and Church’s shoes, may start trading in Hong Kong in late June after a $2 billion IPO, three people with knowledge of the matter said. (Source: Bloomberg)
Prada Leads Luxury Brands Facing Future With HK Listings
Timothy O'Rourke/Bloomberg
A Prada store in the Tsim Sha Tsui district of Hong Kong.
A Prada store in the Tsim Sha Tsui district of Hong Kong. Photographer: Timothy O'Rourke/Bloomberg
Lines snaking outside Louis Vuitton, Hermes, and Prada shops are a regular sight along Hong Kong’s Canton Road, the preferred haunt of Chinese tourists on shopping sprees. Now the Chinese city is becoming a shopping destination of another sort: It’s a favored place for global brands looking to raise money on the stock market.
Prada SpA, the Milan-based luxury goods house, may raise $2 billion through its initial public offering in Hong Kong, according to two people with knowledge of the deal. The Italian maker of Miu Miu bags and Church’s shoes follows cosmetics and skin-care maker L’Occitane Internationale SA, which raised $840 million in the former British colony last year.
Prada’s choice of Hong Kong’s stock exchange over bourses in Milan, London, and New York is more evidence the world’s economic center of gravity is shifting to Asia, Bloomberg Businessweek reports in its May 30 edition. “Companies want to face their future, not their past,” said Sam Kendall, head of equity capital markets for Asia Pacific at UBS.
The flurry of international listings is helping Hong Kong, where mainland Chinese companies have raised $167 billion over the past decade by going public, add to its IPO tally.
Companies raised $51.8 billion through 95 IPOs on Hong Kong’s stock exchange last year, compared with a total of $48.22 billion in 196 deals on the New York Stock Exchange and Nasdaq. So far this year, 26 companies in Hong Kong have gone public raising $7.70 billion, compared with 86 deals worth $26.17 billion in the U.S.
Building Brands
With Asians accounting for as much as 50 percent of luxury sales globally, a Hong Kong listing is a no-brainer, said Aaron Fischer, head of consumer and gaming research at brokerage CLSA Asia-Pacific Markets. “Most of the growth is here,” he said. “So as a brand-building exercise, it makes sense to be close to your customers.”
Chinese consumers, including those shopping abroad, will account for more than half the increase in global sales of luxury goods over the next decade, said Fischer, who is based in Hong Kong.
Samsonite LLC chose Hong Kong for its IPO mainly because of growth prospects in Asia, said a person familiar with the matter who asked not to be identified because the information is private. The U.S. luggage maker plans to open stores in 140 cities in China, which has the most growth potential for its business, said Ramesh Tainwala, the company’s president of Asia Pacific and Middle China.
Handbags, Jewelry
Such factors were also important to Coach Inc. (COH), the largest U.S. handbag maker. It plans to list shares, in the form of depositary receipts, in Hong Kong before the end of the year to “raise awareness of the Coach brand among investors and consumers in the China market,” Chief Executive Officer Lew Frankfort said in a statement.
Prada is scheduled to set a price range on June 6 and list in Hong Kong on June 24, according to a sale document.
Hong Kong’s pipeline also includes an initial share sale by the jewelry unit of billionaire Cheng Yu-tung’s Chow Tai Fook Group, which may raise as much as $4 billion, two people with knowledge of the matter said.
Resourcehouse Ltd., the Australian coal and iron-ore company controlled by Clive Palmer, is seeking as much as HK$28.2 billion ($3.6 billion) in an IPO in Hong Kong, according to a term sheet for the sale.
Cornerstone Investors
Another attraction of Hong Kong is it allows investment banks to make deals with wealthy investors to buy shares before marketing the deal to the public. Such “cornerstone” investors typically agree to hold their shares for six months after buying at the offering price.
Their participation can make it easier for companies to build enthusiasm for the offering. “The retail guys are very affected when they see some billionaire willing to lock himself in for six months,” said George Lin, Asia head of consumer, retail and health care investment banking at Credit Suisse AG.
The initial share sale of MGM China Holdings Ltd., the Macau venture of Kirk Kerkorian’s casino company, may raise as much as $1.5 billion for Pansy Ho, who is selling part of her stake. Kirk Kerkorian and a trust fund controlled Hong Kong property magnate Walter Kwok are among the cornerstone investors, according to the prospectus.
New China Life Insurance Co., the Chinese insurer backed by Zurich Financial Services AG (ZURN), hired at least eight banks for the Hong Kong portion of an initial public offering that may raise as much as $5 billion, people with knowledge of the matter said.
United Co. Rusal, the world’s largest aluminum producer, raised $2.1 billion in 2010, and Swiss commodities trading group Glencore International Plc. allocated part of its $10 billion global IPO to Hong Kong retail investors.
“A Hong Kong listing will raise the profile with all the suppliers and customers we deal with over there,” Glencore CEO Ivan Glasenberg said. “We thought it was very important to be involved in this region.”
To contact the reporter on this story: Frederik Balfour at fbalfour@bloomberg.net
To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Hwee Ann Tan at hatan@bloomberg.net
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