Jimmy Choo expected to float at lowest end of price range

Monday, 13 October 2014
Luxury shoe maker Jimmy Choo [IPO-JIM.L] is expected to price its initial shares sale (IPO) between 140 pence and 160 pence apiece, at the bottom half of its preliminary guidance of 140-180 pence, as said by two sources familiar with the matter on Monday.

Likewise, another source that preferred to remain anonymous, pointed out that the books for Jimmy Choo's IPO were covered throughout the new price range, with strong interest from long-only investors and sovereign wealth funds.

Jimmy Choo would be reportedly valued at 624 million pounds in IPO

As reported by Reuters, this price would value the company, which is aiming to list a 25 percent stake in London, at up to 624 million pounds, below the initial top target of 702 million.

"The market has been on its toes and people have been worried about the performance of previous IPOs such as (fashion retailer) Zalando and (tech company incubator) Rocket," one person close to the transaction and quoted by Reuters said. The same source added that "As investors showed most interest at the 140-160 pence range, it was sensible to narrow it."

Earlier, various market experts including fund managers have expressed concern that Jimmy Choo had circa 100 million pounds of debt and spent a lot of money on opening new shops, around 8 percent of its sales, while the industry average was 5 percent.

If the shares were priced at the top of the revised range, or 160 pence, that would put the stock on 21 times next year's expected earnings per share or 11-12 times next year's expected earnings before interest, tax, depreciation and amortisation (EBITDA), the first source said, reported the ‘Guardian’.

In the same vein, the company's enterprise value would be of approximately 750 million pounds, whereas it would come lower, at around 670 million pounds, if the shares were priced at the bottom of the indicative range, or 140 pence.

As previously stated by the company, Jimmy Choo’s owner, JAB Luxury, aims to sell 25 percent of the firm without directing any of the new capital into the business.

BoA Merrill Lynch is lead managing the listing, with HSBC (HSBA.L) as joint book runner and BHF-BANK as co-lead manager.

“Jimmy Choo is a great brand with good growth potential but it has a high capital expenditure ratio and usually we prefer fashion companies with stronger balance sheets,” said Andrea Gerst, who helps manage the Julius Baer Luxury Goods Fund with 330 million euros (414 million dollars) under management. She added that “Also, given it is a small company, their growth rates are not amazing, relatively speaking.”

According to market sources, the share pricing is scheduled for October,17 with trading expected to start on October, 20.

Angela González Rodríguez

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