Italian luxury goods group Zegna will go public in a US$3.2 billion US Spac transaction

The Italian luxury fashion group Ermenegildo Zegna has agreed to merge and go public with a US special purpose acquisition company. The transaction brings the company’s corporate value to US$3.2 billion and reverses the consolidation trend sweeping the luxury goods industry.

Zegna is a family business since its establishment in 1910. It will raise 880 million yuan through a merger with the European private equity group Investindustrial initiated by Spac, chaired by former UBS CEO Sergio Ermotti US dollars.

Of the funds raised, approximately US$546 million after deducting expenses will enable the Zegna family to cash out some of its shares, but they will retain 62% of the combined company’s shares.

Nearly $250 million will be used to help Zegna invest in its menswear business and give it firepower to find other brands for acquisition. Its $500 million acquisition American luxury brand Thom Browne in 2018.

Gildo Zegna, the 65-year-old chief executive, told the Financial Times: “We could have been independent for another 100 years. But the timing was right, the world has changed a lot, and luxury goods have become very challenging. .”

in a Interview by the British “Financial Times” Before the pandemic, he had said that he had no interest in listing companies.

Zegna’s revenue in 2020 fell by 23% compared to the previous year to 1 billion euros, while at the same time turning from a profit of 38 million euros to a net loss of 45 million euros. In the investor presentation, the company predicted that its performance this year will return to levels close to pre-pandemic.

Gildo Zegna said: “The opportunity has come, and we have seized the opportunity. Scale is becoming more and more important… With the right partners… If they show up, we can do a great job in seizing new opportunities. “

The decision to go public is in stark contrast to the path of many independent, family-owned luxury brands—even before the pandemic wreaks havoc on the industry—to larger conglomerates or private investors.

The family-run Italian luxury brand Etro became the latest company to follow this trend as it confirmed the sale of a majority stake in its business valued at 500 million euros to L Catterton, a private equity group backed by LVMH.

According to the terms of the Zegna transaction, the company will receive an equity value of US$2.5 billion.

The proceeds include approximately $400 million raised last year by Investindustrial Acquisition Corp (the New York-listed entity that Zegna will merge with) and $250 million from private investors who declined to be named.

After the transaction is completed, Investindustrial, an investment company run by Andrea Bonomi, will provide another $225 million. Bonomi himself is the heir to an Italian industrial family and has been wooing Zegna to make a deal since January.

The investment in Zegna will enable Investindustrial to acquire 11% of the company’s shares, as well as the shares acquired as a Spac sponsor. Investindustrial has promised to lock up the shares acquired through its investment for three years.

The company was founded by Ermenegildo Zegna, the grandfather of Gildo Zegna, and is a luxury textile supplier in the northern Italian town of Trivero. Since the 1960s, it has been famous for its exquisite men’s suits, and it was one of the first luxury goods groups to enter China in 1991. It established brand awareness very early, and more importantly, it is now the largest A strong relationship has been established with the landlord in the market.

In recent years, as the demand for men’s suits has declined, the company has shifted its focus to what Gildo Zegna calls “high-end leisure” and invested in its “from sheep to shopping” supply chain, while other companies have sold factories to specialize in Focus on design, marketing and sales.

Since acquiring Thom Browne, Gildo Zegna told the British “Financial Times” that the group has further promoted the brand to the high-end market and doubled its sales. The company has more than 6,000 employees and also has close ties with Chanel, Tom Ford and Gucci to provide fabrics for it.

Gildo Zegna’s cousin Paolo, sister Anna and two sons Edoardo and Angelo also work for the company. When asked whether the decision to list its shares meant that an executive outside the Zegna family might eventually succeed Gil Dorjegna, Bonomi replied that the next CEO to become Zegna was “the right thing”, but in the end It will boil down to merit.

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