The Italian fashion group Ermenegildo Zegna will go public and list on the New York Stock Exchange later this year through a merger with Investindustrial Acquisition Corp (IIAC), a special purpose acquisition company (SPAC) sponsored by subsidiaries of Investindustrial VII, a fund managed by the private equity Investindustrial founded by the Italian businessman Andrea Bonomi.
The Zegna family will retain a controlling 62 percent stake in the merged entity that is expected to have an initial enterprise value of $3.2 billion and an expected market capitalization of $2.5 billion. The deal is expected to close by the end of the fourth quarter of 2021.
On July 18, IIAC entered into a definitive agreement to combine with Zegna with a combination of stock and cash financing. The transaction is expected to deliver approximately $880 million of gross proceeds, consisting of IIAC’s $403 million cash held in trust, a fully committed $250 million dollar PIPE, which, in the light of strong investor demand was upsized by $50 million compared with the original target amount, and approximately $225 million in a forward purchase agreement with Strategic Holding Group (SSH), an independently managed investment subsidiary of Investindustrial VII. SSH will obtain an about 11 percent stake in the merged company. SSH’s investment will be subject to an up to three-year lock-up.
A PIPE, or private investment in public equity, is a private investment round that complements the funds the SPAC raised through its initial public offer.
Zegna was founded in 1910 and has evolved from a producer of textiles and menswear into a purveyor of luxury goods. In 2018, Zegna acquired a majority stake in American luxury fashion brand Thom Browne and doubled its revenues.
At the end of 2020, the group had a presence in 80 countries through 296 directly operated stores. This year, Zegna expects sales to approach those of 2019 after the disruption caused by the outbreak of the Covid-19 pandemic.
Separately, the Italian fashion house Etro entered into a binding agreement to partner with L Catterton, the private equity firm which recently took over the German shoe maker Birkenstock along with Financière Agache, the investment company of the Arnault family. The Arnaults control the French luxury goods group LVMH.
Under the terms of the agreement, L Catterton Europe will acquire a majority stake in the fashion house, while the Etro family will retain a significant minority. Etro’s founder Gerolamo Etro will remain as chairman. According to the Italian press, L Catterton will have a 60 percent stake in Etro. The transaction is expected to close by the end of the year. According to the daily Il Sole 24 Ore, the deal values Etro about €500 million and does not include Etro’s real estate assets.
Founded in Milan in 1968 as a textile company, Etro is known for its paisley motif and bold patterns. Etro has a presence in approximately 140 retail stores in high-end shopping locations as well as being sold through many of the most prestigious department stores and e-retailers worldwide.
L Catterton was created in January 2016 through the partnership of the U.S. private equity Catterton, the French luxury goods group LVMH, and Groupe Arnault, the family holding company of the businessman Bernard Arnault.