Prada IPO May Raise as Much as $2.6 Billion to Fund Expansion

Prada SpA, the Italian maker of Miu Miu bags, may raise as much as HK$20.3 billion ($2.6 billion) through its initial public offering in Hong Kong to fund the opening of more stores.

The Milan-based luxury-goods company is selling 423.3 million shares for HK$36.50 to HK$48 each, according to the IPO prospectus distributed to reporters in Hong Kong yesterday. Selling shares at the top of the range may give the company a market value of as much as HK$122.8 billion, according to data in the document and Bloomberg calculations.

Prada’s share sale may be double that of Chinese shoe retailer Belle International Holdings Ltd., which at $1.3 billion is the largest for consumer-goods companies in Hong Kong, according to data compiled by Bloomberg. Bagmakers Coach Inc. (COH) and Samsonite LLC also plan to sell shares in the former British colony to capitalize on demand for luxury products in China, the world’s most-populous nation.

Mainland China, which doesn’t include Hong Kong, Macau or Taiwan, will remain the fastest-growing market for high-end goods in 2011 as sales rise 25 percent to 11.5 billion euros ($16.6 billion), Bain & Co. said May 3. The country may become the world’s third-largest luxury market in five years, the consulting company predicted.

New Stores

About two thirds of the net proceeds from the initial public offering will be used to finance the expansion of Prada’s directly operated stores, the prospectus said.

Over the next three years the company plans to open about 80 outlets annually, of which as many 12 will be in China and about 25 in Asia, Deputy Chairman Carlo Mazzi said at a briefing yesterday in Hong Kong.

“We are less penetrated than our competition in China,” he said, noting that its Church shoes brand had no retail stores in the mainland. He said the company plans to expand to Northern Europe, where it has no retail outlets as well as other unexploited markets in the Middle East and Latin America.

China accounted for 19 percent of global sales as of Jan. 31, up from 10 percent three years ago, said Alessandra Cozzani, group investor relations director.

Prada had 319 directly operated stores, of which 18 were in China, on Jan. 31, compared with 211 three years earlier, the prospectus said.

Pricing, Debut

Revenue from its stores accounted for 71 percent of Prada’s sales for the year ended Jan. 31, Cozzani said.

The IPO values Prada at as much as 28 times 2011 profit as estimated by banks arranging the sale, a person with knowledge of the matter said June 6. Six comparable luxury-goods companies worldwide, including Burberry Group Plc (BRBY), recently traded at an average 21.1 times forecast full-year earnings, according to a May 20 research note from Goldman Sachs Group Inc.

Prada, which will have about 2.6 billion shares after the IPO, will have a market value of HK$122.8 billion, or more than 70 percent bigger than that of Burberry.

Prada’s shares will be priced on June 17 and will start trading on Hong Kong’s stock exchange on June 24, the prospectus said.

The maker of Church’s shoes has forecast first-half profit growth of at least 46 percent as it opens more stores in Asia.

Profit more than doubled to 250.8 million euros last year on growth in the Asia-Pacific region, where sales jumped 63 percent. Revenue rose 31 percent to 2.05 billion euros.

Resourcehouse, MGM China

Hong Kong, where companies raised $58 billion in IPOs in 2010, has fallen below the U.S. in first-time share sales this year. Resourcehouse Ltd., Australian billionaire Clive Palmer’s iron ore and coal company, on June 4 dropped its fourth attempt in two years to sell stock in Hong Kong, citing adverse global market conditions.

MGM China Holdings Ltd., the Macau casino venture part owned by Pansy Ho, is the only $1 billion-plus IPO in Hong Kong since October to sell shares at the top end of its marketed price range, data compiled by Bloomberg show.

Prada, which postponed plans to list in 2008, is controlled by Chief Executive Officer Patrizio Bertelli, 65, his wife Miuccia Prada, who is 63, and her family. They currently own 94.9 percent of the company, a stake that could be reduced to 80 percent if the full overallotment of shares is taken up during the initial offering.

Intesa Sanpaolo SpA is reducing its stake from 5.1 percent to 1 percent and will not be affected by the overallotment option.

The company sells clothing and accessories under the Prada, Miu Miu, Church’s and Car Shoe brands.

Intesa Sanpaolo, Credit Agricole SA (ACA) unit CLSA Asia-Pacific Markets, Goldman Sachs Group Inc. and UniCredit SpA are managing the IPO, along with Mizuho Financial Group Inc. and Industrial & Commercial Bank of China Ltd., the prospectus shows.

To contact the reporter on this story: Frederik Balfour at fbalfour@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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