Pambianco Study: Armani, Zegna, Dolce & Gabbana Best Suited for IPOs
MILAN — Investors thirsty for a piece of Italian fashion and design could have many enticing options to choose from if only Italy’s entrepreneurs were a bit less averse to the stock market.
Closely-held Giorgio Armani, Gianni Versace, Missoni and Renzo Rosso’s OTB — among others — all have the necessary qualifications for successful stock market listings, according to research by Pambianco Strategie di Impresa, which Thursday published its fourth annual report on the 50 most “listable” Italian fashion and luxury goods firms.
While there are about a dozen new entries (and an equivalent number of departures) the list remains anchored around what Pambianco president Carlo Pambianco called a “hard core” of 29 firms, which have been in the list each year. (These, however, don’t seem inclined to make the jump from “listable” to listed.)
During a conference held at Italy’s Stock Exchange to present the research, Pambianco said the firms on the top-50 list could be ready for an initial public offering within three to five years.
Unsurprisingly, Giorgio Armani came in at the top of the list for the second year in a row, followed by Ermenegildo Zegna (which recently announced the separation of its real estate unit, leading to some speculation that it might be gearing up for a listing — promptly squashed by the men’s wear giant) and Dolce & Gabbana. Armani certainly is the juggernaut in the group, with 2013 sales of 2.2 billion euros, or $2.7 billion at current exchange, almost twice number-two-ranked Zegna’s 1.3 billion euros, or $1.6 billion.
Rounding out the top five most “listable” firms are — also in the same positions as last year — cosmetics retailer Kiko and high-end men’s wear maker Stefano Ricci.
Aside from fashion, Pambianco issued its second 15 most “listable” design firms, which uses the same ranking criteria as the fashion and luxury goods top 50. The top three spots this year go to Flos (second in 2013), Kartell (first in 2013) and B&B Italia (same as last year). Other famous design names, including Artemide, Minotti and Poliform, were reconfirmed, while Arper (in 7th place) and Trend (13th) are newcomers.
Pambianco explained that the methodology used to create the rankings is based on assigning points to eight factors — including sales and profitability growth, brand awareness, company size and distribution network reach. Based on a maximum possible score of 100, in the fashion and luxury goods rankings, Armani scored 81.4 points, Zegna scored 79.8 and Dolce & Gabbana came in with 76.5.
While most companies were repeats, new entries include Corneliani, Valentino, Pinko and Trussardi. Brands including Slowear, Santoni, Marcolin and Alviero Martini were left out this year.
Luca Peyrano, head of capital markets at Borsa Italiana, said there was great interest on the part of foreign investors in “made in Italy.” The last four fashion-luxury goods listings in Milan raised a combined 1.2 billion euros, or $1.5 billion, while investors demanded shares worth up to 25 billion euros, or $31 billion, he said, adding: “I can’t think of a single better reason to list on the stock market.”
If all the 65 companies in the two Pambianco rankings (fashion and design) sought stock market listings they would likely raise more than 12 billion euros, or $15 billion, and have a combined market capitalization of more than 40 billion euros, or $50 billion, he said. “We [Milan] could become the stock market with the highest level of attractiveness for listings in the sector.”
Giovanni Tinuper, a PWC partner who collaborated with Pambianco on the research, said that Italy’s fashion, luxury goods and design industries are worth some 65 billion euros, or $81 billion, in annual sales and generate more than 600,000 jobs.
Despite the obvious advantages of a stock market listing — not only in terms of raising capital, but also in terms of brand awareness and access to high-quality managerial skills — Italian entrepreneurs seem to remain mostly averse to the Bourse. Some apparently think it is too challenging for their companies, some fear handing over control to outsiders. “We know the word ‘listing’ generates anxiety in entrepreneurs,” said Peyrano, joking, as he pointed out that — while being a fairly disciplinary process — preparations for IPOs are not necessarily more complex than selling shares to private equity funds. “We would like the ‘hard core’ to soften up a bit, to go from ‘listable’ to listed.”
Peyrano explained that Borsa Italiana’s Elite program is designed “to help firms open up to outside capital, through stock market listings, but also by preparing them for sales to private equity, for debt offerings and even for mergers and acquisitions.”
One entrepreneur at the event, Domenico Menniti, head of fashion brand Harmont & Blaine, which recently opened its capital to a private equity firm and aims for a stock market listing sometime around the end of 2017 or early 2018, said that the Elite program is “hard work” and “lacks psychological support.” He said that for firms considering a listing, it was “worrying” to see how a company like Tod’s SpA’s shares could be hammered over the past year “for no clear reason.” Peyrano retorted that Tod’s owner Diego Della Valle “is probably very calm. He’s already been through periods where his company’s shares were overvalued and undervalued with respect to the fundamentals.” The important thing, he said, is to have a medium to long-term view.
In the end, however, above all it’s about ambition. If a company is happy with sales of some 1.5 to 2 billion euros, or $1.9 to $2.5 billion, “then, as an entrepreneur, I’m settling for second best,” Peyrano said, adding: “It’s not so much a question of necessity, but of entrepreneurship, of growing abroad and giving myself the tools which will allow me to break into foreign markets, grow and increase my profitability.”
One firm thinking about an IPO is women’s wear and accessories maker Kocca, ranked 47th in this year’s top 50, the same position as last year. Based in Nola, near Naples, not far from Harmont & Blaine, chief executive Andrea Miranda told WWD the company has almost completed the Elite program and is considering whether to open its capital to private equity funds (“we get contacted frequently”) or to list. “If we do list, our main aim would be to raise funds for international growth and we would definitely list in Italy,” Miranda said. Kocca will end 2014 with around 55 million euros, or $68 million, in sales and earnings before interest, taxes, depreciation and amortization of around 15 percent. By 2017, Miranda said he sees sales hitting a maximum of 75 million euros, or $93 million.
Meanwhile, another Italian brand — leather goods maker Fedon — is soon to list its shares on Milan’s AIM market for small and medium-size companies, Pambianco News reported Wednesday. Fedon is not new to the stock market: The company has been listed on Paris Euronext since 1988. The dual listing would serve also to increase the brand’s visibility.
