Breakingviews-Moleskine turns over new leaf with ambitious IPO

Wed Mar 13, 2013 2:54pm IST

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Quentin Webb

LONDON, March 13 (Reuters Breakingviews) - Moleskine is opening a new chapter in the annals of aggressive flotations. The maker of sleek black notebooks is seeking an initial public offering in Milan. The "equity story" is based on strong branding, growth and margins. Investors must now choose whether they want to go along with another tale of consumer infatuation.

The Moleskine saga begins with some creative self-mythologising. In 1997, the company created a brand from the generic term for oilcloth-covered notebooks, which had grown hard to find. Original - and long-dead - aficionados such as Ernest Hemingway and Bruce Chatwin were then invoked to bolster the newly trademarked product.

Moleskine has since grown at a fast pace. The iPad may be everywhere today, but creative sorts still tend to sketch or write by hand. Moleskine has started to hedge its bets by selling all manner of "nomadic objects", up to and including covers for laptops and e-readers. EBITDA at the private equity-backed group hit 33.5 million euros last year, on revenue of 78 million euros. Both figures have roughly doubled in just four years.

UBS, an IPO adviser, reckons the group could now be worth 515 to 775 million euros, according to pre-deal research seen by Reuters. The bank thinks sales could grow about 18 percent a year through to 2017, and assigns a price of 20 to 25 times 2014 earnings. That matches the rich valuations for fast-growing makers of posh consumer goods, such as Michael Kors (KORS.N), Mulberry (MUL.L) and Lululemon LLL.TO.

If this float is successful, it would be a milestone: notepads would probably be the most mundane addition to the high-end consumer goods sector. But there are good reasons for scepticism. Anyone can make swanky notebooks, even if Moleskine has a good name and distribution network. The brand so far lacks credibility in newer areas such as bags and glasses. And there’s always the hard-to-quantify risk that Moleskine loses its cool - perhaps by becoming too ubiquitous or too diverse.

Consumer hits can make terrible investments: look at Skullcandy (SKUL.O) headphones, Heelys roller-shoes, or Pandora (PNDORA.CO) jewellery. And premium valuations depend on robust future growth expectations: if those collapse, share prices follow. "To Have And Have Not" is a nasty feeling for investors.

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CONTEXT NEWS

- Moleskine, the Italian notebook-maker, has begun marketing a planned initial public offering, sources told Reuters on March 4. The company said it had filed a request to list in Milan. The company plans to list a 50 percent stake, comprising both new and existing shares, two of the sources added.

- The Milan-based company has about 130 employees. It is controlled by Syntegra Capital, a private-equity fund that was once part of Societe Generale, which owns a 67.7 percent stake. The remainder is split between Index Ventures, a venture capital firm that owns 15.2 percent; founder Francesco Franchesci, with 10.6 percent; and company management with 6.5 percent.

- Moleskine’s January registration document (in Italian): link.reuters.com/nyj66t

Reuters: Italy’s Moleskine kicks off share listing – sources [ID:nL6N0BWGLM] - For previous columns by the author, Reuters customers can click on [WEBB/]

(Editing by Pierre Briançon and David Evans)

((quentin.webb@thomsonreuters.com))

((Reuters messaging: quentin.webb.thomsonreuters.com@reuters.net)) Keywords: BREAKINGVIEWS MOLESKINE/

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