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Prada IPO Said to Raise $2.14 Billion as Shares Sold at Low End

Prada Said to Raise $2.14 Billion Selling Shares at Low End
Prada is the second foreign issuer in a week, after Samsonite International SA, to scale back its Hong Kong fundraising plans. Photographer: Chris Ratcliffe/Bloomberg

Prada SpA and its owners raised about HK$16.7 billion ($2.14 billion) in this year’s biggest Hong Kong initial public offering after the company sold shares near the low end of its target amid a global stock-market slump.

The luxury company, the Prada family and Intesa Sanpaolo SpA sold 423.3 million shares for HK$39.50 each, according to two people familiar with the matter. The sale gives Prada a market value of about 9 billion euros ($12.7 billion), or 23 times 2011 earnings, said one of the people, who asked not to be identified because the details aren’t public.

The Milan-based company is the second foreign issuer in a week, after Samsonite International SA, to scale back its Hong Kong fundraising plans amid a five-week slump for the Hang Seng Index, which has lost 6.7 percent since May 13. Prada, which starts trading in Hong Kong on June 24, sold stock at a higher valuation than global peers like LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest maker of luxury goods.

“Market volatility and Prada’s high valuation hurt demand,” said Castor Pang, head of research at Hong Kong brokerage Core-Pacific Yamaichi International Ltd. “Even after the low pricing, Prada’s stock still looks much more expensive than peers like LVMH.”

Miuccia’s Stake

President Miuccia Prada, granddaughter of founder Mario Prada, her husband, Chief Executive Officer Patrizio Bertelli, and other family members will receive about $1.3 billion from the sale, before fees and the exercise of overallotment options, and retain a stake worth $10.7 billion, according to data from the prospectus. Intesa will receive about $517 million, and the company about $298 million. About two-thirds of the company’s proceeds will be used to fund the expansion of Prada’s directly operated stores as Asian customers increase spending on luxury goods.

LVMH trades at 18.4 times estimated earnings, according to Bloomberg data. Smaller rival PPR SA, maker of Gucci, is valued at about 13.4 times analysts’ estimates and Cie Financiere Richemont SA at 17.50 times estimates, the data show.

Prada initially sought to sell the shares at HK$36.50 to HK$48, according to the IPO prospectus. The company yesterday narrowed the range to HK$39.50 to HK$42.25 after failing to get orders for half of the 42.3 million shares offered to retail investors, two people with knowledge of the matter said. Prada had enough orders to sell the shares about three times over at that price, according to a person with knowledge of the matter. About ninety-five percent of the stock was sold to money managers and the rest went to retail investors.

Diana Footitt, an outside spokeswoman for Prada in Hong Kong, declined to comment.

Bohemian Crystal

The share sale by Prada, which began in 1913 as a store selling leather bags, trunks and Bohemian crystal in Milan, is the largest for consumer-goods companies in Hong Kong, according to data compiled by Bloomberg. Samsonite, the Mansfield, Massachusetts-based luggage maker, dropped 7.7 percent in its first day of trading yesterday after raising $1.25 billion in its IPO, the bottom of a revised range.

Including Prada, companies have raised $13.2 billion in Hong Kong IPOs so far in this year, compared with $6.2 billion at the same point a year ago. Of the 30 companies to price IPOs this year in Hong Kong and begin trading, 23 have fallen since their debut and the average decline is about 16 percent, the data show.

Penetrating China

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 ($16.3 billion), Bain & Co. said May 3. The country may become the world’s third-largest luxury market in five years, the consulting company predicted.

Prada plans to open about 80 outlets annually over the next three years, of which as many 12 will be in China and about 25 in Asia, Deputy Chairman Carlo Mazzi said June 12. The company had 319 directly operated stores on Jan. 31, of which 18 were in China. 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, Mazzi said.

The company 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. Sales in China grew at a compound annualized rate of about 52 percent in the three years ended January, according to the prospectus.

Excluding the overallotment of shares, a company controlled by the Prada family owns 82.5 percent of the company, down from 94.9 percent, after the sale. Intesa Sanpaolo cut its stake from 5.1 percent to 1 percent and won’t sell shares in the overallotment option.

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

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