Italian designer Zegna to go public in $3.2bn Spac deal

Ermenegildo Zegna is listing its shares via a $3.2bn deal with a blank-cheque company, letting the Italian fashion house join other luxury brands tapping investor cash while keeping the founding family in control.

Zegna said on Monday it will raise $880m by combining with Investindustrial Acquisition Corporation, a special-purpose acquisition company, the chair of which is Sergio Ermotti, former CEO of UBS. The Zegna family will control 62% of the combined entity and the shares will trade on the New York Stock Exchange.

The move is a strategic shift for the 111-year-old company and it comes as luxury-goods makers keep consolidating, following the 2018 acquisition of Versace and LVMH Moet Hennessy Louis Vuitton’s record purchase of Tiffany & Co in 2021. Zegna’s approach contrasts with those deals, as the Spac transaction allows the company to go public yet remain controlled by the current shareholders.

“The timing is perfect, the luxury business is getting very challenging,” Gildo Zegna, CEO and grandson of the founder, said on a call with reporters. “This will create new opportunities in the future,” with the backing of “supportive partners.”

Listing in the US will also provide Zegna more visibility, Andrea Bonomi, the founder of Investindustrial, said on the call. The investment company will own an 11% stake, while the remaining 27% will be traded on the market.

Originally founded as a fabric maker in 1910 by Ermenegildo Zegna in Trivero, Italy, the company went on to become a well-known luxury men's wear brand under the third and fourth generations of the Zegna family.

In 2018, Zegna bought Thom Browne as it sought to attract a younger customer base and add womenswear. The label’s revenue has doubled since the acquisition. Zegna said the brand will continue to invest as it aims to become the leader in men's wear. The priority will be to grow organically, especially in digital marketing. Last month, Zegna struck a partnership with Prada to invest in a cashmere maker in Italy as luxury companies seek to better control their supply chain.

Zegna said that 2020 was the most challenging of his career. The company had to slash operating costs by 20%, an unprecedented move. Still, Zegna maintained spending on operations in China, a key market for luxury. While some regions such as Singapore are still affected by the pandemic, Dubai has been booming, he added.

Zegna operates 296 stores in 80 countries and expects sales this year to recover to the level of 2019.

Luxury problems

Italian luxury labels have been challenged by the pandemic-induced lockdowns and some high-profile names such as Tod’s have sought backing from larger groups such as LVMH. Recently, Salvatore Ferragamo poached Burberry CEO Marco Gobbetti who will join the struggling leather-goods brand in need of a turnaround.

Zegna said it doesn’t intend to be a consolidator of Italian luxury brands the way rival groups LVMH or Gucci owner Kering have become. “We don’t have the ambition to be a conglomerate,” he said.

Firmly established in the US, Spacs have been gaining recent traction with companies and investors in Europe. Last week, a Spac backed by the luxury billionaire Pinault family raised €275m to focus on entertainment companies in Europe.

Among other recent deals, L Catterton, a private equity firm backed by LVMH, agreed to buy a majority stake in Italian fashion house Etro on Sunday.

UBS is advising Zegna, while Deutsche Bank, Goldman Sachs, JPMorgan and Mediobanca are advisers to Investindustrial.

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