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Italian fashion house Prada SpA pulled out all the stops during meetings with investors around the world for its IPO, which raised about USD 2.14 billion, but reduced risk appetite weighed on the deal's pricing on Friday.
The Milan-based company priced the initial public offering at HKD 39.5 a share, three sources with direct knowledge of the deal told Reuters.
Prada and shareholders Prada Holding BV and Intesa Sanpaolo sold 423.3 million shares raising HKD 16.72 billion (USD 2.14 billion), said the sources, who declined to be named because the decision was not yet public.
Despite all the glamour around the IPO, increased volatility in global markets and this week's poor debut by luggage maker Samsonite in Hong Kong weighed on the offering, with Prada cutting the mid-point of its IPO on Thursday.
"The equity market has its own life and may not have anything to do with reality in luxury goods markets," said Selina Sia, head of consumer research at Mirae Asset in Hong Kong.
"Luxury demand is very self explanatory and it makes a lot of sense for companies like Samsonite and Prada to list in Hong Kong, but we're talking about quite a volatile market these days."
In Hong Kong last week, the company hosted a 15-minute fashion show to a packed room of top fund managers who jostled for space at the glitzy Grand Hyatt Hotel to see Miuccia Prada's creations and hear about booming demand for luxury goods in China.
At its home in Milan, the company's management spoke to investors in an office of Prada's Miu Miu brand, its fastest growing line of business that is known for its modern and colorful dresses and handbags.
The benchmark Hang Seng Index has declined in 10 of the last 11 sessions, down 7.3%, and world stocks hit a three-month low on Thursday, weighing on investor demand for new stock sales.
Samsonite, the world's largest luggage maker, closed 7.7% lower in its debut, after trading nearly 11% down early on Thursday.
On top of volatile markets, Prada also had to deal with concerns from fund managers about its rich valuation, and tepid demand from Hong Kong retail investors who were put off by having to pay capital gains taxes in Italy.
Prada filed to sell shares at an indicative price range of HKD 36.5 to HKD 48 each, before narrowing the range to between HKD 39.50 and HKD 42.25 a share, according to two sources with knowledge of the deal on Thursday.
At the top end of its original range, Prada would be trading at 27 times projected 2011 earnings, far higher than an average of 20.4 times for luxury retailers such as LVMH, Hermes International SCA, and Cie Financiere Richemont, according to Phillip Securities forecasts.
At the revised guidance Prada would trade at a P/E of 22.8-24.4 times, more in line with global rivals.
Goldman Sachs, Credit Agricole's CLSA brokerage and Italian banks UniCredit SpA and Intesa Sanpaolo's Banca IMI unit, which are both represented on Prada's board, are joint bookrunners and global coordinators of the IPO.
(USD 1 = 7.801 Hong Kong Dollars)
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