Prada shuns Milan for Hong Kong as IPO signals economic shift

Prada SpA, the fashion house known for its Miu Miu bags and Church’s shoes, is planning the largest initial public offering of a family-owned Italian company since 2006. Investors in Prada’s hometown of Milan will have to reach about 5,800 miles away to buy the stock.

Prada is shunning the Italian exchange for a $2 billion IPO on the Hong Kong exchange because it’s closer to the retailer’s fastest-growing region. The decision was made to “seize the best opportunities offered by the international capital markets,” CEO Patrizio Bertelli said in a statement when it announced the IPO. Losing Prada highlights the struggles facing Borsa Italiana, a unit of London Stock Exchange Group Plc, to gain new listings, said investors, including Lorenzo Crispoltoni of Banca Fideuram SpA. The Italian exchange lost half its value in the past three years amid a dearth of IPOs and the drop in stock prices since 2007. The 332 traded companies on Borsa Italiana have a combined market capitalisation of 425 billion euros ($593 billion), ranking the exchange no higher than seventh in Europe, data from the World Federation of Exchanges show.

“The Borsa’s troubles mirror sluggish economic growth and an exchange that isn’t as visible as others on a global scale,” said Milan-based Crispoltoni, who helps oversee 2.5 billion euros. “Companies that have a global market are looking elsewhere for success.”

Slow growth
Economic growth of just 1.1 per cent last year combined with the region’s sovereign debt crisis to erase 13 per cent from the country’s benchmark FTSE MIB Index in 2010. Italian shares are now the cheapest relative to Europe, the US and the emerging markets on a price-to-book value basis since 1992, according to London-based Barclays Plc. The country is Barclays’s preferred “deep-value” play, analysts led by Edmund Shing wrote in a note to clients March 2. Italy’s gross domestic product grew at an average annual rate of 1.5 per cent from 1999 to 2007, compared with 2.2 per cent for the European Union. Italy contracted 5.4 per cent in 2009. The economy and weak stock market have deterred Italian companies, especially small ones, from going public, said Gioacchino Attanzio, chief executive officer of Milan-based Aidaf, a group that represents family-owned companies.

“We’re in a paralysis,” he said. “Entrepreneurs are more worried than ever about losing control because their businesses are weak.”

Pulled IPOs
Italian biotechnology company Philogen SpA postponed a 65 million-euro IPO last month after Bayer AG, its biggest customer, cancelled contracts. Toymaker Giochi Preziosi SpA, ferry operator Moby SpA and Intesa Sanpaolo SpA’s Banca Fideuram asset-management unit also have scrapped plans for share sales.

Enel Green Power SpA sold 2.5 billion euros of stock in November, the country’s largest IPO in 11 years. Prada is making its fifth attempt in the past decade at selling shares. The company, controlled by Bertelli, his wife Miuccia Prada and her family, is generating record sales.

Revenue grew 31 per cent last year to 2.05 billion euros led by demand in Asia, where sales rose 48 per cent. Credit Agricole SA, Goldman Sachs Group Inc, Intesa Sanpaolo SpA and UniCredit SpA are helping manage the company’s Hong Kong IPO.