Global offering for ordinary shares of Italian casual wear retail chain Ovs started last Friday Feb 13 for institutional investors and it is starting today for retail investors, The offering will end next Feb 24 and trading is expected to start the day after (download here the press release and the Prospectus).
The offering is aimed for as much as 90% to institutional investors and as for 10% to retail investors and regards 101 million shares representing about 44.5% of Ovs capital (112 million shares if the overallotment option is exercised so that floating capital will be 49.3%).
The offering will consist of a capital increase (87 million shares) and of a sale of 14 million shares by actual shareholder Gruppo Coin, a leading Italian retail chain, which in turn is owned by paneuropean private equity operatorBC Partners , Italian private equity operator Investindustrial and Canadian Ontario Teachers Pension Plan.
Ovs shares will be sold in a price range between 4 to 5.4 euro per share. Ovs equity will be then valued between 560 and 746 million euros (before the capital increase) or between 908 millions and 1.225 billions after the capital increase. The total value of the offering then will range between 404 million euros (minimum price and no overallotment option exercise) and 545 million euro (maximum price and no overallotment option exercise; or 605 ,illions after option exercise) (see here a previous post by BeBeez).
The company will then cash in 358 to 470 millions as capital increase while Coin Group will receive 56 to 135 millions. The company will use all or part of the offering proceeds to reimburse part of its financial debt for as mauch as 335 million euros while the remaining part will be refinanced by the banks, Ovs explains in the Prospectus. stressing that if ipo does not raise at least 335 million euros, the company will not go on with the listing.
Moreover the Prospectus highlights that the company had 20.3 million euros of net loss in 9 months ending last 31 October 2014 (after a net loss of 24.3 millions in the same period the year before) while fiscal years ended on 31 January 2014, 2013 and 2012, respectively, the company registred net losses of 10.1 millions, 45.2 millions and 7.5 millions. So the document also says that, whenever a net profit will be made it is not sure if and when profit distributions might be made to shareholders.
As for the debt, the Prospectus says that Ovs took over part of Coin’s financial debt when last year Ovs was spun-off from Coin. That part was valued 805 million euros included matured interest rates. At the end of last October net financial debt was 707.2 million euros (from 726 million on January 31th 2014) that is 5x ebitda (or 5.84x ebitda at Jan 31th 2014).
Enterprise value of Ovs group has been than valued between 10.2x and 11.8x FY 2013-2014 ebitda while global retailers such as Fast Retailing, Inditex and H&M have an average Ev/Ebitda ratio of 22.x and domestic retailers such as Ted Baker, Gerry Weber, Next, KappAhl and Esprit), have an average Ev/Ebitda ratio of 17.8 x.