Prada says Hong Kong IPO roadshow going well

HONG KONG (AP) - Prada SpA and its bankers said recent turmoil in world stock markets won't weaken the Italian fashion house's upcoming Hong Kong IPO, as executives on Sunday continued an international roadshow to promote its expansion into Asian markets.

Prada and Goldman Sachs executives said they think individual investors in Hong Kong will be enthusiastic when the local part of the initial public offering begins this week.

Prada is selling some 423.3 million shares - equivalent to a 16.5 percent stake - making it the first Italian company to go public on the southern Chinese financial center's stock exchange. The shares will be priced on June 17 and start trading June 24.

Prada, which also owns the Miu Miu, Church's and Car Shoes brands, is the latest in a string of foreign companies to list in Hong Kong this year as they seek to tap economic growth in Asia and raise their brand awareness.

However, sliding stock markets around the globe have made it hard for another international listing, Samsonite International S.A., to reach its maximum valuation. The luggage maker, which is also going public in Hong Kong this month, priced its shares last week at the lower end of the proposed range, indicating waning investor interest. Fears that the global economic recovery has stalled have driven investors out of the market and sent stocks lower around the world.

"Despite recent market turmoil, the Prada team is very optimistic," said Mary Koo, an executive director in Goldman Sachs' consumer retail division. Goldman is one of the investment banks working on the deal.

"We don't feel the stress," added Carlo Mazzi, Prada's deputy chairman, who spoke to reporters in Hong Kong via videolink from Milan. Neither Mazzi nor Koo would disclose specific details about investor interest.

The Prada and Goldman executives also shrugged off concerns about the IPO's relatively high valuation and the Italian capital gains tax.

Prada is raising HK$15.4 billion to HK$20.3 billion ($2-2.6 billion) by selling shares at 36.50 to 48 Hong Kong dollars ($4.69 to $6.17), pricing that analysts say is on the steep side.

Investors also face an Italian capital gains tax of 12.5 percent on any profits from selling their shares, an unusual situation in Hong Kong, which does not tax capital gains.

"We expect that with a brand name like Prada, with this growth story and with this valuation, we expect the Hong Kong retail (portion) to be very enthusiastic," Koo said.

Prada is hoping to capitalize on Asia's booming luxury-goods market. Asia is forecast to be the luxury industry's fastest-growing region, and China to be the fastest-growing market, driven by strong economic growth, increasing urbanization and higher spending by the rich, the company said in its prospectus, citing market research. In the next five years, China is forecast to become the third-largest market for luxury sales worldwide.

Prada plans to open about 80 stores a year until the end of 2014, with 20 to 25 of those in Asia, including 10 to 12 in China, Group Controlling Director Armando Tolomelli said on the videolink.

Some 14 percent of the IPO shares will be new, raising at least HK$2.1 billion ($270 million) for the company. Three-quarters of that money will be used to open more stores or expand existing ones while the rest will be used to pay off debt or for working capital and general purposes.

Prada's main shareholders, President Miuccia Prada and her family, who own 94.9 percent, and Italian bank Intesa Sanpaolo, which owns 5.1 percent, will also profit handsomely. The other 86 percent of the shares in the IPO will come from their stakes.

Prada had discussed going public several times in the past, with the most recent attempt delayed after the world financial crisis in 2008 sent markets tumbling.

The company was founded in 1913 in Milan by Mario Prada and started out making leather bags, trunks and crystal. Today the company is known for its stylish leather handbags and modern designs for clothing and footwear that have helped it become a symbol of high fashion.

But the center of gravity in the fashion world is shifting east, said CEO Patrizio Bertelli, who is also Miuccia Prada's husband.

"I wouldn't really focus on Europe as a source of inspiration today," he said. "The Asian markets are far more contemporary than us."

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