June 6 (Bloomberg) -- Prada SpA is seeking to raise as much as $2.6 billion in a Hong Kong initial public offering this month that would give the maker of Miu Miu handbags a higher valuation than most of its European rivals.
The Milan-based company set a price range of HK$36.50 ($4.69) to HK$48 a share, two people with knowledge of the matter said today, declining to be identified as the process is confidential. The IPO would raise $2 billion to $2.6 billion based on the range, the people said. Including an overallotment option, the offering would raise as much as $3 billion, according to Bloomberg calculations.
Prada is expected to command a higher price in Hong Kong than it would have at home because of Asian demand for luxury goods. China is forecast to be the world’s third-biggest market for luxury goods in five years, according to Bain & Co. The IPO values Prada at as much as 28 times 2011 profit as estimated by banks arranging the sale, one of the people said. Six comparable luxury-goods companies worldwide, including Burberry Group Plc, trade at an average 21.1 times forecast full-year earnings, according to Goldman Sachs Group Inc.
On average, Chinese consumer companies “have a higher valuation than consumer companies elsewhere,” said Scilla Huang Sun, head of equities at Swiss & Global Asset Management in Zurich, who oversees about 4 billion Swiss francs ($4.8 billion). “But that’s also due probably to their higher growth potential. Also, all these Chinese companies have almost 100 percent exposure to the Chinese market, whereas luxury companies including Prada have only a partial exposure.”
Whether Prada gets the highest price depends on the market conditions in the coming days as markets are “a bit shaky at the moment,” Huang Sun said, adding that the top end of the range is “definitely on the high side.”
Prada is set to begin trading June 24 and aims to set the final price June 17.
LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest maker of luxury goods, trades at 19.2 times estimated earnings, while smaller rival PPR SA, maker of Gucci, trades at 13.8. Both companies are listed in Paris.
Moncler SpA, the Italian maker of luxury skiwear, today said it was canceling its IPO in Milan because of market conditions and opting to sell a 45 percent stake to investment firm Eurazeo. Salvatore Ferragamo SpA, the Florence, Italy-based shoemaker, still plans an IPO in Milan by the end of June, a person familiar with the matter said today. About 25 percent of the company will be freely traded after the offering, according to terms obtained by Bloomberg News.
Selling in Hong Kong isn’t a guarantee for success. 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 to sell stock in Hong Kong in two years, 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’s share sale would be the largest consumer-goods IPO in Hong Kong and be double the size of Belle International Holdings Ltd.’s $1.3 billion debut in Hong Kong, according to data compiled by Bloomberg. Bagmakers Coach Inc. and Samsonite LLC also plan to sell shares in the city to help them capitalize on China’s surging demand for luxury products.
“A lot of the IPOs that have come through so far are pretty typical companies, and in Prada, you do have something different,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversaw $331 billion worldwide as of March 31.
Prada last week forecast first-half profit growth of at least 46 percent as it opens more stores in Asia. The company said it plans to open about 80 new outlets in the current fiscal year, including 25 in the Asia-Pacific region. 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.
Intesa Sanpaolo, Credit Agricole SA’s CLSA Asia-Pacific Markets, Goldman Sachs and UniCredit SpA are managing the IPO. Mizuho Financial Group Inc. and Industrial & Commercial Bank of China Ltd. are providing assistance as joint leads.
Prada, which postponed plans to list in 2008 because of adverse market conditions, is controlled by Chief Executive Officer Patrizio Bertelli; his wife, Miuccia Prada; and her family. The company sells clothing and accessories under the Prada, Miu Miu, Church’s and Car Shoe brands.
--With assistance from Joyce Koh in Singapore and Elisa Martinuzzi in Milan. Editors: Philip Lagerkranser, Celeste Perri
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