The rapid growth in the luxury market and a very positive outlook for the future has got all the global brands gearing up for expansion with a focus on the Asian region. Salvatore Ferragamo SpA has finalized its plans to raise hundreds of millions of Euros through an IPO to be listed on the Milan Stock Exchange. The company was founded as a shoemaker in Florence, Italy in 1927. The company hopes to raise about €440 million, or about $637 million. To make the investment lucrative Chairman Ferruccio Ferragamo plans to declare dividend on the 2011 earnings to the tune of 40 to 50%.
Salvatore Ferragamo SpA is in a comfortable position to payout high dividends as it has a low debt to equity ratio. The company which is known for its luxury handbags apart from shoes intends to use the funds to further boost its presence in the high-growth market of Asia, and to open 25 new stores world-wide this year. Michele Norsa, the CEO of Ferragamo pointed out that the company sells more in Hong Kong than in any other city in the world. Prada, another big brand from Italy is also going in for an IPO but they are listing in Hong Kong and hope to raise almost $3 billion next week. Mr. Ferragamo said that they believe in Italy and have hence chosen to list in Milan.
The investor interest in luxury stocks is rather high at the moment. Despite a hefty premium, Prada’s bankers have been successful in selling shares to institutional investors and as per reports the initial offer has already been oversubscribed. Ferragamo’s offer is also going well and the order book has already been fully subscribed. The €8.00-€10.50 price range, confirmed last Friday values the company at €1.77 billion at the top end of the price range. The listing will dilute the stake of the family to a certain extent but the Ferragamo family holding company, Ferragamo Finanziaria, will hold a 56% stake in the company and will also control the Salvatore Ferragamo brand.
