By Agnieszka Flak and Valentina Za
MILAN (Reuters) - The founding family of Italian luxury shoemaker Tod's plans to buy out other investors for up to 338 million euros ($344 million) and take the group private in an effort to revive its fortunes by managing its diverse brands separately.
The Della Valle brothers said in a statement their holding company would offer to buy Tod's shares at 40 euros each, a 20.4% premium to Tuesday's closing price, valuing the company at 1.32 billion euros.
French luxury giant LVMH will retain its 10% stake, after raising it last year in a move that Tod's said reinforced the 20-year friendship between the two companies' respective founders, Bernard Arnault and Diego Della Valle.
The buyout bid is the latest attempt to relaunch a company that, like other Italian brands that built their name on craftsmanship, has struggled to appeal to younger luxury shoppers in recent years.
"The objective is to enhance the value of the group's individual brands, giving them strong individual visibility and operational autonomy," the Della Valles said in the statement.
Their holding company owns 64.5% of Tod's.
By 1454 GMT shares in Tod's had jumped 20.2% to 40.2 euros each.
In addition to the eponymous brand famous for its Gommino loafers, Tod's also owns the Fay and Hogan labels, as well as Roger Vivier, whose $800 a pair buckled shoes and successful relaunch have made it the group's crown jewel.
A person close to the bid said the buyout would give the Della Valles freedom to devise different strategies for the brands and decide on which ones to focus further investments, addressing the family's frustration in seeing the group as a whole trade at 50% discount to its main peers.
The person and a second source close to the matter said the bid should not be seen as a prelude to a sale to LVMH, though the French group would naturally be the first port of call were the Della Valles to consider selling in future.
The offer price is the same as when Tod's first listed in Milan in 2000, less than a third of the 145 euros a share the group reached in 2013.
The bid targets only 25.55% of Tod's capital when taking into account the Della Valle brothers' stake and that of LVMH.
Tod's share performance vs luxury peers: https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrwgokvm/tods_OPA.png
Despite stagnating over the past decade, Tod's revenue has tripled since its listing as the brand expanded in China but operating profits have not grown, JPMorgan (NYSE:JPM) said, projecting a profit of 52 million euros this year from 56 million in 2001.
"The road to recovery will be long, complex and uncertain, we think," Citi analysts said, noting Tod's 30% share price drop this year compared with an 11% sector fall.
The shares outperformed the sector last year thanks to LVMH's stake increase and the arrival of fashion influencer Chiara Ferragni on Tod's board of directors.
For Citi, the bid's implied valuation multiple of around 18 times 2023 operating profit was "modest" by industry standards, and may not fully reflect the turnaround potential of the Tod's brand or Roger Vivier's high profitability.
JPMorgan, however, said the worsening macroeconomic backdrop boosted the bid's chance of success.
"We do not anticipate much dispute on the offer price in the coming weeks," it said.
BNP Paribas (OTC:BNPQY), Crédit Agricole Corporate Investment Bank and Deutsche Bank (ETR:DBKGn) are acting as financial advisers and are also providing financing for the offer.
($1 = 0.9825 euros)