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    TOD   IT0003007728

TOD'S S.P.A.

(TOD)
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TOD'S S.p.A.: Arbitrage on acquisition, accelerating momentum

05/13/2021 | 06:12am EDT

One of the latest additions within the Europa One investment fund — that MarketScreener advises on an exclusive basis — is iconic Italian luxury shoemaker and leather goods specialist Tod's.

The key rationale behind this bet is a merger arbitrage based on some strong indications of a potential buyout by LVMH. Momentum is heating up after Bernard Arnault increased his group's shareholding in Tod's from 3.2% to 10% last April, in a €75mil deal that valued shares at €33.

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The Arnault and Della Valle families seized the opportunity to underscore their longstanding friendship ties and "common values", as well as the "further opportunities" to consider. Together, they control more than three-quarters of equity capital and almost all voting rights. 

As a result, there are valid reasons to believe that the families will either take Tod's private — float is minuscule and the interest of a public listing pointless as ever — or that LVMH will absorb the venerable fashion house. 

Buying out the Della Valle's stake would likely command a share price around €50, if not more. The family increased its stake two years ago at more than €40 per share, and there would be a premium to pay for control — plus considerable synergies to factor in. 

Such scenario would give a valuation of about x2 the normalized — that is, pre-pandemic — annual revenue for Tod's, which has been a typical floor in luxury M&A. A higher price cannot be ruled out, but it will remain conditional on the success of the much needed brand revitalization.

In effect, Tod's must reinvent itself after a lost decade during which its ultra-prestigious image — which back in the days made it the darling of celebrities, from the British royal family to Hollywood stars — has lost some of its luster.

It is to serve this purpose that excellent creative director Walter Chiapponi has joined six months ago, credentialed by the successful turnaround of Bottega Veneta — another famous Italian luxury house, this one owned by Kering. He replaced Alessandra Facchinetti, whose own revitalization efforts failed. 

An integration of Tod's into the LVMH's ecosystem would naturally make a lot of sense, as it would open whole new worlds to the newcomer. The French luxury giant brings unlimited firepower thanks to its global platform integrated from purchasing and marketing to distribution.

As a standalone entity, Tod's would likely fall short of overcoming its challenges. Without scale, its cost structure will remain incompressible — be it with respect to marketing budgets, procurement of raw materials or the development of unique craftsmanship — and consume all profits. 

(For the record, Italien peer Ferragamo is stuck in a fairly similar gridlock, albeit no white knight has yet to manifest himself.)

All of that could change overnight if the Della Valle family throws the towel and handles the keys to Bernard Arnault. The success of the revitalization effort remains a necessary condition for Mr. Arnault to make his move: he already proved with DKNY that he wasn't willing to keep ailing brands on life support. 

That being said, it would be absolutely unfair to compare Tod's with DKNY — the latter is a young American brand that benefited from a temporary hype whereas the former is an authentic, unique Italian luxury powerhouse. 


© MarketScreener.com 2021
Stocks mentioned in the article
ChangeLast1st jan.
CHRISTIAN DIOR SE 1.19% 637 Real-time Quote.40.12%
EUROPA ONE I 0.68% 131.15 End-of-day quote.25.82%
EUROPA ONE R 0.68% 171.16 End-of-day quote.25.08%
KERING 2.36% 637.2 Real-time Quote.7.20%
LVMH MOËT HENNESSY LOUIS VUITTON SE 0.48% 631 Real-time Quote.23.51%
TOD'S S.P.A. 1.57% 45.3 Delayed Quote.59.17%
All news about TOD'S S.P.A.
07/26Dior, Fendi frenzy helps luxury group LVMH extend its reach
RE
07/18LVMH MOËT HENNESSY LOUIS VUITTON : backed fund to buy 60% of Italian fashion lab..
RE
05/20TODAY'S ANALYST RECOMMENDATIONS : AstraZeneca, Aviva, Baidu, FedEx, J Sainsbury...
05/17Global luxury sales could return to pre-COVID levels this year, Bain says
RE
05/13GLOBAL MARKETS LIVE : Walt Disney, Canada Goose, Tod's, Burberry, Sonos...
05/12Tod's sees possible venture with LVMH, but no talks ongoing
RE
05/12TOD'S S P A : sales bounce back in first quarter driven by strong China
RE
05/10ALERT  : New purchase in the MarketScreener Europe Portfolio
04/30Delphine SAS completed the acquisition of an additional 6.8% stake in TOD'S S..
CI
04/29LVMH, Tod's Looking at Doing 'Something Together' -Reuters
DJ
More news
Analyst Recommendations on TOD'S S.P.A.
More recommendations
Financials
Sales 2021 825 M 967 M 967 M
Net income 2021 -30,4 M -35,6 M -35,6 M
Net Debt 2021 524 M 614 M 614 M
P/E ratio 2021 -49,4x
Yield 2021 0,12%
Capitalization 1 499 M 1 760 M 1 758 M
EV / Sales 2021 2,45x
EV / Sales 2022 2,13x
Nbr of Employees 4 596
Free-Float 25,5%
Upcoming event on TOD'S S.P.A.
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus UNDERPERFORM
Number of Analysts 15
Last Close Price 45,30 €
Average target price 42,10 €
Spread / Average Target -7,06%
EPS Revisions
Managers and Directors
Andrea della Valle Vice Chairman & Co-Chief Executive Officer
Umberto Macchi di Cellere Chief Executive Officer & Executive Director
Diego della Valle Chairman & President
Emilio Macellari Chief Financial Officer & Executive Director
Luca Cordero di Montezemolo Independent Non-Executive Director
Sector and Competitors
1st jan.Capi. (M$)
TOD'S S.P.A.59.17%1 760
PUMA SE9.18%17 691
DECKERS OUTDOOR CORPORATION51.68%12 033
CROCS, INC.147.65%9 681
ALPARGATAS S.A.35.88%5 724
DR. MARTENS PLC0.00%5 460