IPO

Prada plans Hong Kong IPO to raise up to $2.6B

AP News
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Posted: Jun 07, 2011 6:19 AM
Prada plans Hong Kong IPO to raise up to $2.6B

Italian fashion house Prada SpA plans to raise up to $2.6 billion in a listing on Hong Kong's stock exchange, according to a person familiar with the deal, joining other foreign companies flocking to cash in on China's rising fortunes.

Prada plans to sell some 423.3 million shares in range of 36.50 to 48 Hong Kong dollars, according to the person, who spoke on condition of anonymity because they weren't authorized to comment officially.

If the shares are sold at the top of the indicative price range, Prada would raise HK$20.3 billion ($2.6 billion). The price will be finalized on June 17 and the shares will start trading on June 24, the person said.

The company was founded in 1913 in Milan by Mario Prada and started out making leather bags, trunks and crystal but its modern designs have helped it become a symbol of high fashion. It now also owns the Miu Miu, Church's and Car Shoes brands.

The company is privately held, with President Miuccia Prada and Chief Executive Officer Patrizio Bertelli each owning 33.2 percent. Miuccia Prada's brother Alberto Prada and sister Marina Prada each own 14.2 percent. Their stakes are owned through a holding company. The remaining 5.1 percent is owned by Italian bank Intesa Sanpaolo.

Prada is the latest in a string of companies going public in Hong Kong, attracted by the surging economy of its massive neighbor China that is minting millionaires and billionaires at a rapid clip. Hong Kong is a Chinese territory but has its own currency and legal system.

According to The Hurun Report, China's version of the Forbes Rich List, the number of people worth at least 10 million yuan ($1.5 million) grew by about 10 percent to 960,000 people in 2011.

China's newly wealthy are spending their money on a wide range of luxury goods, including designer clothing, flashy cars and expensive apartments. Airplane makers and shipyards are predicting that rich Chinese will propel sales of superyachts and private jets while Chinese collectors have helped turn Hong Kong into the world's third-largest auction center.

In a pre-listing document filed with the Hong Kong stock exchange, Prada said it expects Asia to be the luxury industry's fastest growing region, and China to be the fastest growing market. In the next five years, China will become the third-largest market for luxury sales worldwide, according to market research.

China's strong economic growth, increasing urbanization and higher spending by the rich will drive annual sales growth 15 to 20 percent in the luxury goods market from now until 2014, the company forecast.

Prada plans to open 70 stores in Asia by 2014, with 30 of those in China. It will also open 30 Miu Miu stores in Asia during the same time frame, adding to 25 currently.

"We believe further growth is possible due to continuing growth of the Chinese economy, which enables us to further our penetration into Chinese cities," the document said.

Asia accounted for a third of Prada's roughly euros 2 billion ($2.9 billion) in sales in the year ending January 31, second only to Europe, which had 42 percent.

Prada is holding a fashion show and presentation for investors Tuesday evening in Hong Kong as it prepares for the initial public offering.

The company is also looking at expanding in the Middle East, South America and Eastern Europe, according to the document.

Prada had discussed going public in the past, but the move was delayed after the world financial crisis in 2008 sent markets tumbling.

Swiss commodities trader Glencore and luggage maker Samsonite have also listed in Hong Kong this year. Luxury handbag maker Coach plans a listing in Hong Kong later this year to raise awareness of its brand in Asia.