Tod’s Shares Soar Following News of Possible Delisting, Merger With L Catterton Affiliate

MILAN — Tod’s shares continued to soar Monday morning following the news that the Italian group was planning to go private through a deal with an L Catterton affiliate. By midafternoon, Tod’s shares were up 18.15 percent at 42.96 euros on the Milan Stock Exchange and closed up 18.37 percent at 43.04 euros.

Analysts believe the delisting will take place this time around, after a failed attempt in 2022, which did not fulfill the 90 percent threshold.

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On Sunday morning, the Italian luxury group — through chief executive officer Diego Della Valle, Andrea Della Valle, DI.VI. Finanziaria di Diego Della Valle & C. Srl and Diego Della Valle & C. Srl — disclosed it had entered an agreement with a newly incorporated Milan-based vehicle called Crown Bidco Srl. This is owned by LC10 International AIV LP, a private fund affiliated with L Catterton Management Ltd., backed by LVMH Moët Hennessy Louis Vuitton.

As per the agreement, Crown Bidco will launch a voluntary tender offer aimed at acquiring 36 percent of Tod’s SpA, almost 13 million shares, at 43 euros per share, or about 512 million euros, in order to delist Tod’s from the Milan bourse. The agreement includes the possibility of a merger if the delisting were not achieved.

In her Barclays report, Carole Madjo said it was likely the agreement was made “out of [Tod’s] need to further invest: Since the failed tender offer, Tod’s performance has been resilient, but we think the group probably still needs to make in-depth investment in the business, especially in the current environment, so the return of the news on delisting may not come as a particular surprise.”

Madjo added that the announcement “was not surprising given Tod’s long-standing relationship with LVMH. LVMH holds 10 percent of the company through subsidiary Delphine SAS, while Tod’s had previously stated that LVMH would be their preferred group to sell to if they ever wished to do so. Given that L Catterton was co-created by LVMH, we think Tod’s could in theory eventually be integrated into LVMH after some time with L Catterton…but we think yesterday’s announcement is unlikely to move the needle for LVMH’s equity story, given Tod’s group smaller business size.”

Ubs analysts believe that the agreement “could see other potential M&A candidates in the luxury sector react in a positive way.”

Gabriel Debach, market analyst at eToro, views Tod’s determination in delisting as a reflection of the luxury market’s current dynamics. “The growing competition and the trend toward an increasing concentration, in fact, could make it difficult for a company such as Tod’s, with a market capitalization of about 1.3 billion [euros], [to] compete with the major conglomerates.”

A delisting, continued Debach, would allow Tod’s more freedom and flexibility to enhance each brand and provide more operational autonomy, with an eye on medium- and long-term objectives, beyond the short-term scrutiny of the stock market.

Equita analysts imagine the tender offer could kick off in about month and close within the following 40 trading days. Compared with Tod’s previous delisting attempt, the alliance with L Catterton is now “more believable since the majority and minority shareholders are committed with the offerer to vote in its favor. And investors that snub the bid will end up with stock in an unlisted group.”

The deal values Tod’s at just over 1.4 billion euros.

Citi analysts warned that shareholders may think that since the price of the bid is only 7.5 percent above the price of the failed offer in 2022, it may not fully reflect the improvements seen at the Tod’s brand and undervalue the success of Roger Vivier.

Over the past month, Tod’s shares rose 14 percent following a solid 2023 performance. As reported, in the 12 months ended Dec. 31, the Italian group’s preliminary revenues amounted to 1.12 billion euros, rising 11.9 percent compared with the previous year. At constant exchange rates, revenues were up 14 percent.

These figures imply a growth of 7.5 percent in the fourth quarter at constant rates, driven by the retail channel, which was up 11.9 percent.

Sales of the Tod’s brand increased 10.4 percent to 562.9 million euros. After the exit of Walter Chiapponi after the spring 2024 show, Tod’s will unveil the first collection by newly appointed creative director Matteo Tamburini this month during Milan Fashion Week.

Revenues of Roger Vivier were up 16.5 percent to 286.7 million euros. The group also comprises Hogan, which showed a 9.3 percent growth to 214.2 million euros, and Fay, with sales that climbed 13.2 percent to 60.4 million euros.

Stifel analysts said the 17.6 percent premium of the shares’ price as of Friday (the last trading day preceding the deal announcement), is a premium of 21 percent compared to the average share price in the past 12 months, and the higher of the price of the failed delisting in 2022, which stood at 40 euros.

The delisting is seen as “a precondition to ensure the pursuit of [Tod’s] future growth programs and consolidation,” allowing the group “to pursue its objectives in a market environment and legal framework characterized by greater management and organizational flexibility, with faster decision-making and execution times and also benefiting from reduced management and listing costs,” according to a statement issued Sunday.

Analysts have speculated for a while that Tod’s Group could be sold, pointing to LVMH chairman and CEO Bernard Arnault as a buyer. This speculation mounted after LVMH increased its stake in Della Valle’s company to 10 percent for a total of 74.5 million euros in April 2021.

Diego Della Valle & C. Srl, a company controlled by the Italian entrepreneur, entered into a sale and purchase agreement with Delphine SAS, a fully owned subsidiary of LVMH, for the sale of 2.25 million shares of Tod’s SpA, representing 6.8 percent of the capital. LVMH is a longtime investor in Tod’s, as it already owned 3.2 percent.

The funds managed or advised by L Catterton Management represent approximately $35 billion of investments through three multiproduct platforms: private equity, credit and real estate. Founded in 1989, the group has made approximately 275 investments in some of the world’s most iconic consumer brands. L Catterton, for example, in 2021 took a majority stake in Etro.

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