MILAN — The panorama of the Italian style trade is altering by the day — actually.
A day after Etro revealed it had agreed to promote a majority stake to L Catterton, the Ermenegildo Zegna Group mentioned it expects to publicly checklist on the New York Stock Exchange by the tip of the 12 months in an deal that’s anticipated to present the style group a market capitalization of $2.5 billion. To this finish, the Italian males’s put on large has entered right into a enterprise settlement with Investindustrial Acquisition Corp., a Special Purpose Acquisition Corporation, or SPAC, sponsored by funding subsidiaries of Investindustrial VII LP.
While the deal will permit Zegna to additional develop globally and proceed to construct its manufacturing pipeline via acquisitions, chief govt officer Gildo Zegna, who will retain his position and add that of chairman of the corporate, on Monday morning firmly waved away any concept of constructing a style conglomerate. “This is an industrial project, not a financial one,” he mentioned.
Pointing to Italy’s manufacturing prowess, “where 70 percent of ready-to-wear brands” are produced, he reiterated his aim is “to control the supply chain, become stronger and integrate brands within our own culture and DNA and remain competitive.”
Andrea C. Bonomi, founding father of Investindustrial and chairman of the Industrial Advisory Board, admitted constructing a conglomerate “is a current story,” however he mentioned Zegna “will not form an agglomeration of brands because size counts. It plans to build the Zegna brand and have a family of companies that have the Zegna DNA, the Zegna way of doing things, which is more coherent with Italy rather than a conglomerate of Italian brands, which would not fit with this particular project. Zegna will grow by acquisitions of like-minded businesses as it’s not [seeking] opportunistic [acquisitions].”
The closing of the transaction is predicted to happen within the fourth quarter of this 12 months and the Zegna household will proceed to manage the corporate with a stake of about 62 p.c. Investindustrial may have an 11 p.c stake and 27 p.c could be free floating. Based on the transaction worth, the merged entity may have an anticipated preliminary enterprise worth of $3.2 billion.
The transaction is predicted to ship roughly $880 million of gross proceeds, consisting of IIAC’s $403 million money held in belief, a completely dedicated $250 million personal funding in public fairness, upsized by $50 million in mild of robust investor demand, and about $225 million in a purchase order settlement with Strategic Holding Group Sàrl, an independently managed funding subsidiary of Investindustrial VII LP and topic to a lockup of as much as three years.
Sergio Ermotti, chairman of Investindustrial Acquisition Corp., mentioned the SPAC was created for one of these transaction, to checklist “a well-managed company with strong fundamentals and growth potential like Zegna, supporting the champions of Made in Italy with their growth ambitions. This is a perfect and virtuous example of how a SPAC creates value, with speed, ease of execution and minimum disruption in the long term.”
He underscored Zegna’s “heritage and sustainability at its core for more than a century, a vertically integrated luxury laboratory with full control of the value chain for highest excellence and a global group that was a pioneer in China, with a relevant part of the sales derived from that market, which is a natural platform for growth.” He additionally touted the success of the Thom Browne acquisition made in 2018, which since then has doubled its gross sales.
“With Zegna we identified a group that includes both a strong family heritage and a leading position in sustainability, one of the pillars in Investindustrial’s investment strategy,” mentioned founder Andrea C. Bonomi, who can also be chairman of the Industrial Advisory Board. He touted Investindustrial’s long-term dedication to develop and develop the Zegna firm around the globe. Investindustrial just isn’t new to the posh world and final month offered the Sergio Rossi model to Fosun Fashion Group.
Ermotti and Bonomi will be a part of the Zegna board, which contains the likes of Angelica Cheung, Michele Norsa, Domenico De Sole and Ron Johnson, amongst others.
Zegna defined that Ermotti approached the household and there by no means was any competitors with one other SPAC or inventory alternate. “We took advantage of this [offer], we could have stayed private for another 100 years, but the timing is perfect,” he contended. “The luxury business is very challenging and we will create new opportunities with the backing of such a supporting partner — we hope Bonomi will stay on forever.”
Bonomi mentioned the Zegna firm “would gain visibility through a listing in the U.S., which will remain a key market. We are not taking away from the Italian market. Zegna is a global company and the U.S. is the right place [for its IPO].”
Zegna dismissed any speak of succession. “The family is very united, nothing will change, we will stick to the way we were before and the deal was fully approved, also by the fourth generation unanimously.”
Zegna underscored the household firm’s “very clear strategy. The first growth will be organic. There are so many things to push, we have a big project by the end of the year conceived before the IPO.” He mentioned “many marketing resources will go into that transition of moving the perception of the brand from clothing to a luxury casual brand, and this needs a lot of support.”
There about 32 relations, however solely a few of them are lively within the firm, who, along with Gildo, are his sisters Anna and Benedetta; his two sons Edoardo and Angelo, chief advertising and marketing and sustainability officer, and head of retail and merchandising within the U.S., respectively; his cousin Paolo, and nephew Francesco Trabaldo.
Armando Branchini, govt chairman at InterCorporate, praised the Zegnas for his or her robust management expertise and innovation, seeing this venture as “opportune and important. They are not selling to cash out and go fishing, and they are not raising a white flag, giving up. This is the continuation of the entrepreneurial culture of the family, based on discipline, using capital in a very rigorous way, and it shows courage, as it allows the market to judge the company’s performance. Also, listing in the U.S. shows entrepreneurial maturity, they know the reputation of the brand is very strong there, and this is a strong signal toward retailers and consumers.”
In addition, the itemizing will appeal to administration skills. “A part of the family will need to become good shareholders, rather than good managers,” mentioned Branchini.
On the opposite hand, two luxurious analysts who requested anonymity puzzled if a public itemizing was the best choice, as it’s going to put strain on the corporate every quarter — particularly now that the boys’s formalwear section is challenged. But each agreed it might be a approach to overcome the generational modifications any family-owned firm ultimately faces.
Another analyst mentioned he believed the itemizing in New York would assist Zegna see larger valuations and underscored how it might assist appeal to new expertise.
“The SPAC is offering speed and certainty of execution,” mentioned Ermotti. “The Zegnas are not selling a part of the company but finding a partner from an industrial point of view.”
“They understand this is not a money-making or quick fix. The family has a long-term goal for the next 100 years, and this is also long-term for us,” echoed Bonomi, who declined to supply the identify of the high-profile traders, underscoring they had been additionally long-lead. He mentioned the personal funding in public fairness had been oversubscribed in a short time. “If you know where you come from and where you go, the SPAC market is a good market.”
Among the targets going ahead, Zegna is conscious the corporate’s “digital [operations] can do much better,” whereas Thom Browne is “ahead of the pack.” He trumpeted the Italian firm’s luxurious textile platform, “unique in the industry,” envisioning further alternatives. He cited the acquisition final month of cashmere agency Filati Biagioli Modesto SpA in an settlement with Prada. “There is clear evidence knitwear is the next booming sector.”
He underscored that Zegna will “not be going into women’s wear, this is a very important statement. Thom Browne is flying in women’s. We see organic growth, strengthening our supply chain of specialized niches and protecting Italian know-how.”
Thom Browne “came along when we were thinking of an acquisition,” mentioned Zegna, who would see shopping for one other model solely “if it fits with our culture and can be integrated within our structure. We have a lot of paper on our desk, but there is nothing now, it has to be another Thom Browne.”
The Zegna model has expanded into the posh leisurewear section, rising this class from 38 p.c of gross sales in 2016 to greater than 50 p.c in 2021.
Sustainability was a key subject because the CEO identified the corporate was the primary in luxurious to provide sustainable and recycled materials from waste materials from the mill and that the contemporary funds will assist it proceed on this path. Bonomi mentioned ESG is essential to non-public fairness companies on the whole and to Investindustrial particularly.
“This [Zegna] is an extraordinary company both in terms of the environment and at the governance level, which will be very important as a public company. It is world class, with no evolution required. Women are already 60 percent [of employees], with three world class women on the board, who are key in every decision. We bring governance to the companies and in this case we learn from Zegna.”
The firm has no debt, mentioned Bonomi, who famous that the Zegnas “under-promise and overachieve,” as persons are identified to be in Piedmont, the area they hail from.
Zegna was “very positive about 2022,” saying he already noticed higher outcomes this 12 months than anticipated, near 2019 outcomes “because of a healthy diet.” In 2019, the corporate reported gross sales of simply above 1.3 billion euros. The manufacturing crops had been partially capable of run by producing medical robes and protecting masks final 12 months.
Zegna admitted 2020 “has to be remembered as the most challenging in my 40 years [at the company], but also the most rewarding of my life. In my silence I was able to protect the structure and the business. This project came at the right time, with a very lean and very fast-moving company. In a way I tried to turn the negative and sadness, loneliness of COVID-19 into a positive angle, and I must say that the team reacted in a fantastic way and bravely to the new challenge.”
He mentioned he had minimize working bills by 20 p.c, which had “never happened in the history of the company,” in addition to capital expenditures, however “not in China. It’s a market that unless you keep your foot flat on the accelerator you go backward. We never stopped as we did not in 2008 and 2009 during the Lehman [Brothers] crisis.”
In 1991, Zegna was the primary luxurious males’s put on model to open in China, and Greater China accounted for 35 p.c of the corporate’s attire, equipment and textile revenues in 2019.
As of Dec. 31, the group had a presence in 80 international locations via 296 straight operated shops.
Additional sources from the IPO will strengthen capital expenditures and advertising and marketing. “You will see a very, very healthy and ambitious Zegna in 2022, we can meet any challenge in the luxury market. We are the only luxury men’s brand and we want to consolidate our leadership,” the CEO mentioned.
Zegna spoke fondly of America, his “school,” the place he labored within the ‘80s, and he was upbeat about gaining additional publicity and model consciousness within the U.S.
He noticed the silver lining of a “dreadful 2020” for shops and at retail in America, as now, after chopping orders, they’re coming again with reorders and there shall be a turnaround, which requires publicity, he noticed. Mentioning his personal relaxed look in the course of the Zoom name — a lightweight blue shirt below a deconstructed blue jacket — he mentioned he was pointing consumers into “this direction, not a formal look.”
“America is a country of relationships, it’s the first thing I learned 40 years ago: if you build a relationship, it will be forever,” mentioned Zegna, who now feels “rewarded, capitalizing on this” via “a fantastic deal with Nordstrom,” for instance, the place all 15 of Zegna’s shops inside Nordstrom will grow to be concessions. Wholesale, which accounts for round one-third of revenues, stays key, particularly within the U.S. and Europe, he mentioned.
“We want America to be stronger, we are strengthening our position in America and we are going to make it. We will keep investing and we are here for the future,” he mentioned.
He admitted the Asia Pacific’s “on-and-off lockdowns” are penalizing enterprise, and he expressed issues about Indonesia and Australia. “The pandemic is not over, in that part of the world in particular. We are very strong in China, but we have to strengthen Korea, Japan and South East Asia, there’s room for improvement there, there’s interest for our brand.”
Incidentally, he emphasised the rising significance of Dubai, the fastest-growing marketplace for Zegna after China. “It’s the most international hub, which used to be Hong Kong and New York but not anymore. Our store in the Dubai Mall is our number-one store in the world, with an average of 25 different nationalities buying there every day, excluding the Chinese. It’s unbelievable, it’s an incredible testing platform. If you are smart you can find niches outside China and the U.S. and our new resources will strengthen that possibility to do new business with new projects.”
These included the opening of pop-up outlets. “We have a very high loyalty factor among customers, because we do care and we know what clienteling is about. We have an incredible staff — service is so important in men’s wear — but we are working to capture new customers.”
Zegna mentioned the model’s made-to-measure section — not solely formal but additionally casualwear — accounts for 10 p.c of gross sales. “Without our supply chain this would not be possible,” he mentioned.
This is why he underscored natural development. “You understand what I have on the plate, it’s just a matter of setting priorities, focus on a few countries and just do it.”
Ermenegildo Zegna Group was suggested by UBS Investment Bank and Sullivan & Cromwell. Deutsche Bank, Goldman Sachs Bank Europe, SE – Succursale Italiana, JP Morgan Securities Plc and Mediobanca acted as monetary advisers to Investindustrial Acquisition Corp. Chiomenti and Kirkland & Ellis acted as authorized advisers to Investindustrial Acquisition Corp.