At the foothills of Northern Italy’s Apennines, Ermenegildo Zegna was established in 1910 as a family-run manufacturer of wool fabrics.
On Monday, the company, which has grown into a global luxury fashion house that owns the Thom Browne brand, took a significant step toward going public by participating in one of the most significant trends on Wall Street in recent years: the IPO.
Zegna announced on Monday that it would merge with a publicly traded acquisition fund, known as a SPAC, in order to become a publicly traded company on the New York Stock Exchange. The transaction, which is expected to value Zegna at approximately $3.2 billion, including debt, may pave the way for other privately held luxury conglomerates to follow in Zegna’s footsteps.
The transaction is also the latest indication that major luxury fashion conglomerates are preparing to grow even larger, seeing an opportunity in acquiring rivals and establishing themselves as empires. LVMH Moet Hennessy Louis Vuitton, the fashion empire that has recently entered into agreements to acquire companies such as Tiffany & Company, is perhaps the best example of this trend.
Takeovers of this nature have increased dramatically in recent years, with rivals on the other side of the world pursuing similar empire-building ambitions. Tapestry, formerly known as Coach, has acquired companies such as Kate Spade and Stuart Weitzman, while Capri Holdings, formerly known as Michael Kors Holdings, purchased the Italian fashion house Versace for $2.1 billion in 2018. In addition, Capri Holdings acquired the Italian fashion house Versace in 2018.
Luxury spending has remained strong as a result of consumers’ willingness to spend on jewellery, apparel, and other indulgences — even as the global economy continues to recover from the effects of the flu pandemic. The shares of LVMH, which owns brands such as Dior, Stella McCartney, and Fenty, have increased by more than 60% this year, while those of Kering, which owns brands such as Gucci and Saint Laurent, have increased by 45 percent.
In its early years, Zegna was known primarily as a top-tier manufacturer of men’s wear fabrics, which later evolved into the production of suiting. The purchase of a majority stake in the fashion label Thom Browne in 2018 marked the beginning of Zegna’s ambitious plan to build a stable of luxury brands. (It continues to produce suits for other high-end labels, including Tom Ford.)
Daily Business Briefing
July 16, 2021, 4:40 p.m. ET
Zegna now has nearly 300 stores in 80 countries, according to the company. And, in a sign of confidence in the resurgence of consumer spending on fashion, the company expects its sales to come close to pre-pandemic levels in the current fiscal year.
While Zegna’s pursuit of additional resources in order to expand is not new, the manner in which it is doing so is.
In order to do so, it is merging with a SPAC, which is an acronym for special purpose acquisition company, which is a fund that is raised through the stock markets solely for the purpose of merging with a privately held company and allowing it to go public.
To maintain Zegna’s position as a global leader in luxury, the company’s chief executive, Ermenegildo Zegna, who is also the grandson of the company’s founder, said in a statement: “We will continue to invest in creativity, innovation, talent, and technology.”
Over the past two years, the popularity of these funds has skyrocketed as a result of their ability to allow companies to enter the stock market more quickly than they could through a traditional initial public offering. ) (SPACs have come under increasing scrutiny from regulators in the United States, where the vast majority of these funds are traded.)
Investindustrial, a European investment firm, is partnering with Zegna to create a fund called Merging with Zegna. The transaction will provide Zegna with approximately $880 million in new cash while allowing the company’s founding family to retain a roughly 62 percent ownership stake.
According to Sergio Ermotti, chairman of the Investindustrial SPAC, “our goal now is to support Zegna as it embarks on this important new chapter in its history while also providing the general public with an opportunity to invest in one of the last great iconic independent luxury brands,” he said in a statement.
In the event that the SPAC’s shareholders approve the transaction, the transaction is expected to close by the end of the year.