Shares in Italian luxury-footwear firm Tod's have surged after the company announced its plans to delist from the Milan stock exchange. At 0911 GMT, shares traded at EUR42.66, marking a 17.3% increase.
Tod's revealed that it has entered into a framework agreement with L Catterton, a private equity firm backed by LVMH, for the sale of a 36% stake in the company. As part of the deal, L Catterton, which joined forces with LVMH and Groupe Arnault in 2016, will purchase the stake for EUR43.00 a share, totaling 512.3 million euros ($552.4 million), according to Tod's.
Equita analyst Paola Carboni commented, "The price offered corresponds to a premium of 18% to Friday's closing price," emphasizing the favorable terms of the agreement.
Despite the sale, the founding family Della Valle will maintain its majority stake of 54%, ensuring continued control over the company. Additionally, LVMH subsidiary Delphine will hold a 10% stake in Tod's.
Analysts Thomas Chauvet and Lorenzo Bracco from Citi estimate that the deal values Tod's at approximately EUR1.42 billion. According to FactSet data, the current market capitalization of Tod's is EUR1.20 billion.
Tod's Faces Challenges in Privatization Plan
In August 2022, the Della Valle family had hoped to take Tod's company private in an effort to revive declining sales and refocus on brand investment. Unfortunately, the delisting attempt fell short of the minimum shareholder acceptance required. Some shareholders believed that the offer price of EUR40 per share was inadequate, according to Citi analysts.
Now, with evidence of Tod's turnaround plan and the value of its renowned brand Roger Vivier, investors may perceive the increased offer price of EUR43 per share as still insufficient, as per Citi's analysis.
In late January, Tod's reported higher-than-expected sales for 2023 and expressed optimism about its future growth potential.
This delisting setback serves as a reminder of the obstacles faced by small luxury brands in an industry largely dominated by conglomerates like LVMH, Kering, and Richemont, cautioned Citi analysts.
Short-term benefits from this announcement may be seen among other luxury companies currently undergoing a turnaround process, such as Burberry and Salvatore Ferragamo, as indicated by Citi. Consequently, their respective shares have risen by 2.9% and 3.5%.