上海对外贸易学院 2012 — 2013 学年第二学期 “Case Studies in Financial Management” Final Examination (Paper A) 选课序号： 612.043.301(2) 任课教师： 唐旭君 姓 名： 学 号： 考试形式： □闭卷 ■开卷 双语教学： ■是 □否 修读方式： ■必修 □选修 □辅修 试卷页数 共 18 页 考试时间： 年级专业： 需计算器： 机考座位： 150 ■是 分钟 □否 号机
PRADA: TO IPO OR NOT TO IPO: THAT IS THE QUESTION, AGAIN
It was January 25, 2011 and Guido Santini of the investment bank Grupo Capo Milano had just been asked to prepare a recommendation on how Prada should raise the money for its planned expansion in Asia and to pay the significant portion of its long-term debt that was maturing within one year. Although he had known this request would be coming at some point, he had expected a bit more time. His recommendation had to be presented to the Prada Board of Directors at their annual general meeting scheduled in two days, on January 27. THE MISSION The board requested that Santini prepare a report recommending and ranking alternatives for raising over 1 billion euros within the next six to 12 months. With more than €1 billion of debt maturing within 12 months (almost half in the next six months), Prada needed to have a credible plan in place to meet these obligations. In addition to the capital to refinance its existing debt, Prada had identified Asia as an area for future growth, and this growth also required capital. Asia was currently experiencing significantly higher growth than other parts of the world, and Prada wanted to be able to take part in and benefit from this. Consequently, Santini’s job was to recommend to the board how Prada could best secure the necessary capital to pay its maturing loans and start its expansion in the Asian markets as soon as possible. An important consideration for the board was the significant pressure coming from outside the firm. The media made sure that Prada’s key stakeholders were aware of the company’s current financial situation, and these stakeholders were, as a consequence, starting to apply pressure on Prada to make known its intentions with respect to its strategic and financial goals at the upcoming annual general meeting. Prada’s financial needs were well-known because of the many high profile deals that its parent company had undertaken over the past 10 years in its quest to become one of the pre-eminent luxury brands in the world. Despite many successes, this series of acquisitions was not as successful as Prada would have liked. In fact, they left the company with significant debts, which were all coming due at roughly the same time. One of the major alternatives being discussed by the media was that Prada was considering an initial public offering (IPO). This was not a new alternative for the company. Over the past decade, Prada had tried to go public on several occasions, but the IPOs were cancelled each time due to last-minute unfavourable 1
changes in market conditions. Given the ongoing global financial crisis, it was not clear that current market conditions were any more favourable, especially in Europe where concerns persisted with respect to debt levels in many countries. Consequently, Santini knew that it was even more important for Prada to have a series of alternatives for the board to consider at this time. Before deciding which alternatives to propose and how to rank them, Santini had his team assemble detailed information on the fashion industry and Prada’s current financial and strategic position. FASHION INDUSTRY The fashion industry consisted of five segments: haute couture, luxury, affordable luxury, mainstream and discount. Haute couture was the most expensive and exclusive of the segments. Companies in this segment produced custom-made clothing from expensive materials for a very exclusive group and included Christian Dior, Chanel, Givenchy, etc. Though the luxury segment was a step down in terms of quality and price, it still used high quality materials and prices were high. Some of the best known companies in this segment were Dolce & Gabbana, Prada,...
Please join StudyMode to read the full document