Prada forced to cut price by a fifth for Hong Kong market debut

PRADA failed to dazzle investors yesterday as the Milan fashion house was forced to cut the final price of its highly anticipated Hong Kong stock exchange listing by nearly one-fifth.

The super brand, which owns the Miu Miu, Car Shoe and Church's labels, sold 423.3 million shares at HK$39.50 (310p), the bottom of the revised range set by the company earlier this week. It values Prada at nearly 8 billion, compared with the roughly 9.75bn suggested by the original top offer price of HK$48.

Analysts said the offering had been hit by broader volatility as events in Greece have continued to unsettle markets. Retail investors, who play a significant role in Hong Kong IPOs, were also put off by the fact that they will be liable for Italian withholding tax on dividends and capital gains tax upon selling Prada's shares.

Nevertheless, the debut is the largest listing to date by a western luxury goods company in Hong Kong, and is the largest flotation in the city this year. The shares are due to begin trading on 24 June.

Founded in 1913 as a leather goods shop by Mario Prada, the company is now run by his granddaughter, designer Miuccia Prada, and her husband Patrizio Bertelli, the firm's chief executive. Its 319 stores across the globe drove sales of €2.1bn (1.86bn) last year, producing core earnings of €536m.

The Prada family will receive about 804m from the sale, and retain a controlling stake of 82.5 per cent that is worth about 6.6bn. Intesa Sanpaolo, Italy's second-largest bank, sold shares worth about 320m.

The company will receive about 184m, roughly two-thirds of which will be used to fund expansion.

Prada plans to open 80 outlets a year for the next three years, of which as many 12 will be in China, where it currently has 18 shops. Prada has racked up compound annualized growth of about 52 per cent in China during the past three years, and analysts predict the country could become the world's third-largest luxury market within the next five years.

Prada will open a further 25 stores elsewhere in Asia, and plans to expand into northern Europe, the Middle East and Latin America.

About 42 per cent of its sales currently come from Europe, and 40 per cent from Asia. Asian revenues are expected to overtake those from Europe within the next three years, a fact the company used to justify its decision to go for an IPO in Hong Kong.

Prada has attempted a public listing on numerous occasions during the past decade, but was derailed by a series of market downturns, including the slump that followed the terrorist attacks in the US in 2001. It has also reportedly turned down approaches from private equity investors.