The Pros And Cons Of A Prada Sale

No, I am not talking about a shoe sale. The Sunday Times reported that Prada Group is in talks with several potential purchasers including tycoon Richard Caring. Other interested parties, according to their "city sources," are two private equity houses.

Prada had been expected to do an IPO when conditions were right, both in the market and at their company. The company is in better shape following the sale of Jil Sander and Helmut Lang and the renewed focus on its key brands Prada, Miu Miu and Church's shoes. And the luxury market is also going strong.

But with tons of money floating around other coffers, Patrizio Bertelli may have been talked into going a different route by city bankers, the same city bankers who may have leaked the news to the Times in order to get Caring to put up or shut up.

Here are some of the pros and cons of each of Bertelli's options.

IPO
PRO--Bertelli could retain control of the group by only selling a minority stake.
CON--He would have legal obligations to disclose information and would have to answer to a group much more picky than luxury customers, luxury stock analysts and investors.

PRIVATE INVESTOR
PRO--A deal with someone like Caring could be a long term one, providing Bertelli and his wife, Miuccia Prada, with some cash and the company with security.
CON--It is unlikely a buyer like Caring would come in for less that 50 percent of the company, so Bertelli would likely lose control. Plus if a private owner gets bored of an asset or if one of other his companies falters, Prada Group could suffer either from a lack of Caring's attention and resources (money) or even by forcing him to sell Prada Group.

PRIVATE EQUITY
PRO--There's a lot of money swilling around in private equity coffers today and, at least in luxury, there's a bit of a track record of positive change under private equity management.
CON--Bertelli would definitely have to cede control of his group, but added to this is the pressure of knowing that the private equity company will want either another sale or an IPO in three to five years -- but not before Prada is again saddled with the kind of debt Bertelli has just struggled to shed.

Which way will he go? The company has been downplaying talk of an IPO recently and certainly many in the industry feared that Bertelli's tempestuous personality would not go down well with investors, but, other than that, I have really no idea. Stay tuned.

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