Jimmy Choo narrows IPO price to bottom half of range-sources

-A +A

LONDON (Oct 14): Luxury shoe maker Jimmy Choo expects its initial share sale to be priced between 140 pence and 160 pence a share, the bottom half of its preliminary guidance of 140-180 pence, two sources familiar with the matter said on Monday.

That would value the company, which is aiming to list a 25 percent stake in London, at up to 624 million pounds ($1 billion), below the initial top target of 702 million.

"The market has been on its toes and people have been worried about the performance of previous IPOs such as (fashion retailer) Zalando and (tech company incubator) Rocket," one person close to the transaction said.

"As investors showed most interest at the 140-160 pence range, it was sensible to narrow it."

Weaker equities markets have recently hit demand for new issues in Europe. French energy services firm Spie and Italian cosmetics firm Intercos failed to attract enough demand for their initial public offerings (IPO), resulting in both being pulled last week.

Fund managers have also expressed concern that Jimmy Choo had around 100 million pounds of debt and spent a lot of money on opening new shops, around 8 percent of its sales, while the industry average was 5 percent.

One of the sources said the books for Jimmy Choo's IPO were covered throughout the new price range, with strong interest from long-only investors and sovereign wealth funds.

Sources told Reuters last week that the books were covered throughout the original price range, including extra shares that could be sold in a so-called over-allotment option.

If the shares were priced at the top of the revised range, or 160 pence, that would put the stock on 21 times next year's expected earnings per share or 11-12 times next year's expected earnings before interest, tax, depreciation and amortisation (EBITDA), the first source said.

It would also give the company an enterprise value of around 750 million pounds. If the shares were priced at the bottom of the indicative range, or 140 pence, it would give it an enterprise value of around 670 million pounds, the source added.

At 140 pence, it would put the stock on 18 times next year's earnings, compared with the luxury goods industry average of 16.1 times and on 11 times next year's EBITDA, compared with a sector average of 9.4 times.

Italian leather goods maker Salvatore Ferragamo, a close rival of Jimmy Choo, is trading on 18.2 times next year's earnings and 10.4 next year's EBITDA.

Jimmy Choo made adjusted EBITDA of 46.9 million pounds on revenue of 281.5 million in 2013. In the first half of 2014, revenue reached 150.2 million and EBITDA 27.6 million.

BoA Merrill Lynch is lead managing the listing, with HSBC as joint bookrunner and BHF-BANK as co-lead manager.

($1 = 0.6209 British Pounds)