Aeffe, the fashion group of designer Alberta Ferretti and parent company of Pollini SpA, intends to use the funds raised from its initial public offering to finance expansion and cut its debt. The listing on the Milan stock exchange will also enable it to increase brand awareness and introduce a stock option program for managers.
The IPO was priced at €4.1 per share, at the bottom of the desired €4.1-5.4 price range, giving the group a market capitalization of about €440 million. The company decided to float 37.26 percent of its capital, including an over-allotment option, in a global offer that ran from July 9 to July 18, attracting demand for twice the amount of the shares on offer. The stock is scheduled to start trading on the Italian stock exchange on July 24.
Aeffe is issuing 19.0 million new shares, while IM Fashion SA, controlled by Alberta Ferretti and her brother Massimo, are selling 15.8 million of their existing shares. A further 5.2 million shares have been earmarked for the over-allotment option.
The capital increase raised around €78 million. The proceeds will cut debt, which stood at €118.6 million at the end of March, and put Aeffe in a position to seize acquisition opportunities, although there are no immediate projects in this respect.
On top of Alberta Ferretti, Aeffe owns the brands Moschino and Pollini and has a license agreement with the French designer Jean Paul Gaultier. The group recently extended for five years a ready-to-wear agreement with Gaultier, which will now expire with the 2013 Spring/Summer collection, and Pollini will start producing shoes for Gaultier in 2008. Pollini already manufactures leather goods for Alberta Ferretti and footwear for the Moschino and Moschino Cheap and Chic brands.
Aeffe intends to increase its retail network by opening 8-10 directly-operated stores and about 55 franchised stores over three years. Currently, the group has about 150 single-brand stores that are directly operated (DOS) or in franchising. Pollini will open 15 stores, including sites in Munich and London. The target areas for are Europe as well as the Middle and Far East. Pollini currently has 17 DOS, of which 15 are in Italy, and 22 franchised stores.
In the first quarter, Aeffe booked a 12 percent rise in sales to €87.1 million, lifted by a 19 percent increase at its shoe and leather goods division, which includes Pollini. The division represented 22.9 percent of Aeffe’s sales, or €20.8 million. The remainder was generated by the ready-to-wear business, whose sales rose 10 percent to €70.0 million
Pollini itself booked sales of €14.9 million in the quarter, up from €12.7 million a year earlier. In the full year of 2006, Pollini’s sales reached €47.9 million against €42.5 million a year earlier.
Over the next three to five years, Aeffe plans to increase the weight of the shoe and handbag business to 30 percent of its total sales.
Aeffe expects the growth enjoyed in the first quarter to continue during the rest of the year and indicated that its dividend policy to distribute about 30 percent of net profits to shareholders.