A business lesson from Ermenegildo Zegna
Ermenegildo Zegna announces his shares via a $ 3.2 billion deal with a blank check company, allowing the Italian fashion house to join other luxury brands by dipping into investor money while keeping the control of the founding family.
Zegna said on Monday it would raise $ 880 million by partnering with Investindustrial Acquisition Corp., a specialist acquisition company chaired by Sergio Ermotti, former CEO of UBS Group AG. The Zegna family will control 62% of the combined entity and the shares will be traded on the New York Stock Exchange.
The move is a strategic shift for the 111-year-old company and it comes as luxury goods manufacturers continue to consolidate, following the acquisition of Versace in 2018 and the record-breaking purchase of Tiffany & Co. by LVMH Moet Hennessy Louis Vuitton SE this year. Zegna’s approach contrasts with these deals, as the SPAC transaction allows the company to go public while remaining controlled by current shareholders.
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“The timing is perfect, the luxury sector is getting very difficult,” said Gildo Zegna, CEO and grandson of the founder, during a call with reporters. “This will create new opportunities in the future”, with the support of “solidary partners”.
Listing in the US will also give Zegna more visibility, Andrea Bonomi, founder of Investindustrial, said during the call. The investment company will hold 11% of the capital, while the remaining 27% will be traded on the market.
Originally founded as a fabric manufacturer in 1910 by Ermenegildo Zegna in Trivero, Italy, the company has grown into a well-known luxury menswear brand under the third and fourth generations of the Zegna family.
In 2018, Zegna bought Thom Browne with the aim of attracting a younger clientele and adding women’s clothing. The label’s turnover has doubled since the acquisition. Zegna said the brand will continue to invest in its goal of becoming the leader in menswear. The priority will be to grow organically, especially in digital marketing. Last month, Zegna partnered with Prada SpA to invest in a cashmere maker in Italy as luxury firms seek greater control over their supply chain.
CEO Zegna said last year has been the most difficult of his career. The company had to reduce its operating costs by 20%, an unprecedented move. Nonetheless, Zegna maintained its operating expenses in China, a key luxury market. While some regions like Singapore are still affected by the pandemic, Dubai is booming, he added.
Zegna operates 296 stores in 80 countries and expects this year’s sales to return to 2019 levels.
Italian luxury brands have been challenged by the lockdowns induced by the pandemic and some leading names such as Tod’s have called for support from larger groups such as LVMH. Recently, Salvatore Ferragamo SpA hired Burberry CEO Marco Gobbetti to join the struggling leather goods brand in need of a turnaround.
Zegna said he did not intend to be a consolidator of Italian luxury brands as rival groups LVMH or Kering SA, which owns Gucci, have become. “We don’t have the ambition to be a conglomerate,” he said.
Firmly established in the United States, PSPCs have recently gained ground with businesses and investors in Europe. Last week, a SPAC backed by billionaire luxury family Pinault raised 275 million euros ($ 324 million) to focus on entertainment companies in Europe.
Among other recent deals, L Catterton, a private equity firm backed by LVMH, agreed on Sunday to acquire a majority stake in Italian fashion house Etro SpA.
UBS advises Zegna, while Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan and Mediobanca are advisers to Investindustrial.