Prada’s high-priced HK IPO to raise $2.6bn
Italian fashion house Prada could raise up to $2.6bn (£1.6bn) in an initial public offering in Hong Kong, setting a valuation for the company significantly higher than its European peers.
Prada set an indicative price range of HK$36.5 to HK$48 a share for the IPO as it started meetings with Asian investors to gauge appetite for the deal, sources told Reuters.
The IPO is being priced at 27 times projected 2011 earnings at the top end of the range, the source said, in a deal largely aimed at funding expansion and renovation in Prada’s fastest-growing market of the Asia Pacific.
The source declined to be identified because the details have not been made public.
“Twenty-plus times PE looks expensive,” said Peter Elston, strategist at Aberdeen Asset Management Asia. “But luxury goods companies such as Prada have got good, visible top-line growth for the next 20 years. There are high barriers to entry as you can’t go out and create a luxury brand from nothing.”
In Singapore, about 60 investors and fund managers attended a lunchtime presentation by Prada’s Chief Executive Patrizio Bertelli.
Some expressed concerns about the pricing.
“There’s no reason for it to trade higher than LVMH, which has a more diversified portfolio. Prada may be banking on the China story, but all the other luxury brands are also going into China and it’s going to be very competitive and tough there,” said one manager of a Singapore-based fund, who declined to be identified.
Prada, 95 per cent owned by the families of chief executive Bertelli and his fashion designer wife Miuccia Prada, has shelved plans to go public three times over the last decade.
It is betting on a boom in the consumption of luxury items in China, the world’s second-largest economy, to lure investors to the IPO, the first for an Italian company in Hong Kong.