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Prada Plans Hong Kong IPO as China Wealth Spurs Demand

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Prada Plans to Sell Shares to Public in Hong Kong IPO
Prada Holding NV chief executive Patrizio Bertelli. Photographer: Giuseppe Aresu/Bloomberg

Jan. 28 (Bloomberg) -- Prada SpA, the Italian fashion house known for its triangular logo, said it will start the process for selling shares in an initial public offering in Hong Kong, as rising incomes in China spur demand for luxury goods.

Prada’s board approved the appointment of Intesa Sanpaolo SpA, UniCredit SpA, Credit Agricole SA’s CLSA and Goldman Sachs Group Inc. as joint coordinators and book runners for a sale of shares to financial institutions, it said in a statement yesterday. Prada would be the first Italian company to list in Hong Kong, according to data compiled by Bloomberg.

The Milan-based maker of Miu Miu bags and Church’s and Car Shoe footwear follows European companies including L’Occitane International SA in seeking to tap investors in Hong Kong, as they seek access to financial markets to help fund opening stores in emerging markets. A record HK$384.4 billion ($49 billion) was raised in IPOs excluding overallotments last year.

“We believe luxury goods will be the fastest growing consumer category in China,” said Aaron Fischer, a Hong Kong-based analyst at CLSA Ltd. “This will increase the focus on the luxury goods market by investors over the next few months and may result in a re-rating of some of the Asian listed names.”

Luxury demand in Greater China may rise by 20 percent to 25 percent over the next 10 years, according to CLSA.

China Consumers

Prada, which is controlled by Chief Executive Officer Patrizio Bertelli, his wife Miuccia Prada and her family, had a 51 percent increase in nine-month sales in Asia, excluding Japan. The number of middle-income and affluent consumers in China will almost triple to 415 million in 10 years, the Boston Consulting Group Inc. said in November.

Prada’s global expansion has led to “significant growth” in sales and profit, Bertelli said in the statement. “Strengthened by these results and confident in the future development of the group, we can now face the coming challenges with serenity and seize the best opportunities offered by the international capital markets.”

Asia excluding Japan is the biggest and fastest-growing region for LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods manufacturer. Cie. Financiere Richemont SA, world’s largest jewelry maker, said Jan. 17 that fiscal third-quarter sales rose 57 percent in the Asia-Pacific region.

Milan Listing?

Prada, which postponed plans to list in 2008 because of adverse market conditions, would have a valuation of at least 7.5 billion euros ($10.3 billion) based on current estimates if it sold shares in Hong Kong, compared with between 5 billion euros and 6 billion euros in Milan, a person familiar said last week. Prada may seek to accommodate Italian investors by selling some shares in Milan, the person said.

“It’s the right time to do it,” said Armando Branchini, vice-president of Milan-based consulting firm Intercorporate. “Asian investors will consider the decision to list in Hong Kong as a kind of recognition of, and tribute to, the importance of the region.”

A company spokesman declined to comment on whether Prada would also sell stock in Milan, or any other exchange. Officials for Borsa Italiana SpA didn’t have an immediate comment.

Prada may post sales of almost 2 billion euros in the fiscal year ending Jan. 31, while earnings before interest, taxes, depreciation and amortization will be close to 500 million euros, people familiar with the matter said this month. Yesterday’s statement gave no financial details and didn’t say how much the company will seek to raise in a sale.

Prada’s debt was 485 million euros at the end of 2009, the company said in March. Prada said in September that it had improved its net financial position. Parent company Prada Holding BV also has debt, which hasn’t been disclosed.

Glencore, L’Occitane

L’Occitane listed in Hong Kong in May, raising about $700 million. Its shares gained 4.4 percent to HK$21.25 at the 4 p.m. close today, extending a 41 percent advance from its IPO price of HK$15.08.

Glencore International AG, the world’s largest commodities trader, plans to raise about $2 billion to $2.5 billion in Hong Kong as part of a $10 billion IPO in the Chinese city and London, people familiar with the matter said.

Prada, which was founded by head designer Miuccia Prada’s grandfather Mario Prada in 1913, still operates its first outlet in Milan’s 19th-century Galleria shopping arcade.

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

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net; Edward Evans at eevans3@bloomberg.net.

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