Ermenegildo Zegna, the Italian luxury fashion group, is taking the SPAC route to go public. It has combined with a US investment company, resulting in a $3.2 billion valuation for the new enterprise.
Bucking the consolidation trend in the retail industry, the luxury menswear brand will take this route to fuel its expansion in Asia and the United States.
Zegna is a family-owned concern and was founded in 1910. It intends to raise $880 million by combining with the European private equity group Investindustrial, which former UBS chief executive Sergio Ermotti chairs.
Under the terms of the deal, Zegna will sell a portion of their holdings and retain 62% of the combined company, which is being given an equity value of $2.5 billion.
About $546 million of the funds raised, net of fees, will allow the Zegna family to cash in on a part of their stake. Almost $250 million will be used for investing and acquiring other brands. Gildo Zegna, the 65-year-old chief executive, told the Financial Times: “We could have remained independent for another 100 years. But the moment is appropriate and the world has changed a lot and luxury has become very challenging.”
Revenue Strategies by Zegna
In an earlier interview before the Pandemic he had said the company had no interest in going public. But the loss to business in the last years has forced the company to rethink its strategy. Revenues at Zegna dropped 23 per cent to €1 billion in 2020 from the year before, while it swung to a net loss of €45 million from a profit of €38 million.
Though the company is hopeful of recovering and going to its pre Pandemic levels this year. Gildo Zegna said: “The opportunity came and we took advantage. Scale is becoming important . . . with the right partner . . . we can do a super job in taking new opportunities if they come along.”
Other family-owned businesses have opted for selling a part of their business or merging with bigger brands or conglomerates to ride over their losses. Family-run Italian luxury brand Etro sold a majority stake that valued its business at €500 million to L Catterton, the LVMH-backed private equity group.
The $2.5 billion equity value include roughly the $400 million raised last year by Investindustrial Acquisition Corp, as well as $250 million from private investors whom it declined to name. A further $225 million will come from Investindustrial, the investment firm run by Andrea Bonomi, once the deal completes. Bonomi, is the scion of an Italian industrial family and has been eyeing a stake in Zegna for long.
The investment in Zegna will give Investindustrial an 11 per cent stake in the company, along with shares it will receive as the sponsor of the SPAC. The shares will be locked in for three years.
The company, founded by Gildo Zegna’s grandfather, Ermenegildo Zegna in the northern Italian town of Trivero, was a textile supplier initially. It became a well-known suits brand in the 1960s. It was also the first luxury brands to enter China in 1991.
With the business seeing a downturn in recent years, the company has shifted focus to what Gildo Zegna describes as “upscale leisure”, and has invested in its “sheep to shop” supply chain. It paid $500 million for the U.S. luxury label Thom Browne in 2018. Recently, Ermenegildo Zegna, along with Prada SpA, acquired a majority shareholding in cashmere supplier Filati Biagioli Modesto. They each took a 40% stake in the company.
The acquisition of Thom Browne has further pushed the brand’s standing in the luxury realm. Zegna employs 6,000 people and has close ties with Chanel, Tom Ford and Gucci, to which it supplies fabrics.
