Luxurious Italian fashion house Ermenegildo Zegna will go public later this year thanks to a deal with a so-called special puprose acquisition company (spac, an empty purse shell). The company, currently wholly owned by the Zegna family, will be valued at $3.2 billion (2.7 billion euros) through the IPO. That’s what made the company announced on Monday.
Zegna, which specializes in men’s fashion in the higher segment, wants to raise money with the sale of a total of 38 percent of the shares to expand in Asia and the United States. Zegna was the first western luxury men’s brand to open its own stores in China in 1991. 35 percent of the company’s turnover now comes from there. The sale of the shares is expected to raise $880 million. The family owns the remaining 62 percent of the shares.
Current chairman of the board Gildo Zegna, grandson of founder Ermenegildo Zegna who started the company in 1910, said to Reuters news agency: “We could have remained a family business for another hundred years, but the timing was perfect and the world of luxury has become quite a challenge.” Last year Zegna said to the Financial Times that he was not considering an IPO.
The move the fashion house is taking now fits in with a recent trend among Italian family businesses: luring outside investors to fund expansion, ramp up marketing spending and compete with bigger players like LVMH. The sale of part of the company is then more a necessity than a free choice, because the luxury clothing industry was hit hard by the corona crisis. Due to the global lockdowns, the demand for luxury clothing collapsed, including for suits. Zegna saw its turnover fall last year, by 23 percent to 1 billion euros. The profit of 38 million euros in 2019 turned into a loss of 45 million a year later.
The New York IPO of Zegna is an Italian get-together: the spac was launched by the European private equity group Investindustrial and is led by Sergio Ermotti, former chairman of the Swiss bank UBS. Ermotti resigned from UBS at the end of last year, where he was succeeded by the Dutchman Ralph Hamers.
The IPO via an empty stock exchange shell shows that this way of going public has not yet come to an end. In Zegna’s case, the company will join a stock exchange shell that already contains $400 million in assets. Such listed vehicles are pre-filled with investors’ money. Then they look for a company to merge with. In this way, companies that want to go public avoid the usual extensive run-up to an IPO, such as discussions with banks and having the books checked. Last year spac after spac went public for a total of $80 billion worldwide. That record was shattered again in the first three months of 2021. In mid-2021, according to data company Refinitiv ., there was raised for $100 billion through 370 spac deals and chased another 400 stock exchange shells on companies to buy. Since then, regulators have been keeping a closer eye on the stock exchange shells and things have slowed down a bit.
Hedge fund manager Bill Ackman announced just this Monday that he was canceling a proposed spac deal. Ackman wanted 10 percent of the shares of through his own spac buy music company Universal Music Group. Instead of a takeover via the empty stock shell, Ackman now opts to have the $4 billion deal go through his Pershing Square hedge fund. The reason for this turnaround are questions that the SEC had asked about the planned financing via Ackmans spac.