Permira has many motives to kill its Golden Goose
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
LONDON, June 19 (Reuters Breakingviews) -In Aesop’s fables killing a goose that lays golden eggs is a short-sighted action that can damage future earnings. In Permira’s case killing its Golden Goose IPO was necessary to avoid another disastrous listing.
On Tuesday, the Italian luxury group that sells $550 a pair sneakers beloved by pop icon Taylor Swift blamed a dicey market and political uncertainty in Europe for postponing its 1.7 billion euro initial public offering. A sluggish luxury market, the group's slower growth and a substantial amount of net debt don’t help. Permira’s Dr Martens DOCS.L IPO flop in 2021 gave it another reason to play it safe.
Golden Goose’s prospects of a juicy listing looked dim by Tuesday. Bankers priced its shares at 9.75 euros, near the bottom of a price range of 9.5 euros and 10.5 euros. That’s equivalent to under 11 times the EBITDA the company generated in 2023, a noticeable discount to its Italian luxury peer Moncler MONC.MI which trades on 13 times. It’s also just slightly above the 1.3 billion euro price tag Permira paid for Golden Goose in 2020.
Still, Golden Goose was a tough sell from the get-go. The company is heavily reliant on selling expensive sneakers which could be risky given consultancy Bain & Company expects sales growth of luxury goods to stay flat this year. Meanwhile, Golden Goose’s own growth is losing steam. It is expected to increase its revenue by 10% annually over the next six years, down from 17% in 2023. Golden Goose is also more leveraged relative to listed peers like Moncler which operates with net cash. Before the IPO, Golden Goose's net debt was around 479 million euros, equivalent to 2.4 times its 2023 EBITDA.
European political uncertainty is a knottier problem for investors to overcome. If Marine Le Pen’s far-right party becomes the largest group in France’s national assembly the economy may end up on a more unstable footing. This may dent consumer confidence but also make markets nervous about neighbouring Italy, which sits on high debt. Shares in LVMH LVMH.PA and Moncler are down 7% since June 9 when France announced a surprise snap election.
Permira’s biggest motivation, however, is likely to be self-preservation. If Golden Goose were to suffer the same disastrous post-IPO performance as Dr Martens, it would dent the private equity shop’s credibility. Shares of the British bootmaker are down 78% since its IPO in 2021. Unlike the fable, killing this Golden Goose may be Permira’s best chance at avoiding further embarrassment.
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CONTEXT NEWS
Italian luxury sneaker maker Golden Goose has postponed its initial public offering on the Milan bourse because of market volatility arising from political uncertainty in Europe, the company said on June 18.
Golden Goose, which was scheduled to list on June 21, said this was not the right environment to take the company public, citing market deterioration after the European parliamentary elections and the calling of snap general elections in France.
Bookrunners said the IPO was oversubscribed multiple times, at 9.75 euros ($10.47) per share. It was earlier estimated to be priced between 9.50 euros and 10.50 euros per share.
Golden Goose, owned by private equity firm Permira, was aiming for a market capitalisation of up to 1.86 billion euros, well below initial expectations.
Editing by Lisa Jucca, Oliver Taslic and Streisand Neto
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