OVS SpA Targets M&A Activity With 80M Euro Capital Increase
MILAN — Although many retailers are struggling as international countries emerge from recent lockdowns and new confinement measures are enforced, Italian retail chain OVS SpA expressed confidence on Tuesday by revealing a capital increase of up to 80 million euros aimed at supporting potential M&A activities.
Reporting its latest financial results, the fashion retailer, which operates the OVS and Upim store networks, said the board has approved the issuance of new ordinary shares for up to 80 million euros by July 31. OVS SpA said a price for the new shares will be determined according to market conditions, share valuation and the company’s economic and financial conditions.
The capital increase could fit with the company’s goal to target new M&A activities. In particular, confirming market speculations that OVS SpA was targeting fashion retailer Stefanel SpA, the company’s chief executive officer Stefano Beraldo pointed out that OVS “submitted a binding offer aimed at acquiring some of the assets pertaining to Stefanel SpA and in particular its storied brand. Considering the valuation of this offer, the needed financial resources largely fall within the company’s current economic means.”
Stefanel was launched in the contemporary market segment in 1980 as the private label of the Maglificio Piave knitwear manufacturer established in 1959 by Carlo Stefanel.
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After almost three decades of success, the company faced harsh times following the 2008 financial crisis and laid out a restructuring plan. In 2017, the apparel company inked a rescue deal with the British fund Attestor Capital LLP and the management company of private equity funds Oxy Capital Italia Srl aimed at restructuring its debt, consolidate the patrimony and relaunching the company.
As part of the deal, the two funds acquired a majority stake and Giuseppe Stefanel, the son of the brand’s founder, retained a 16.4 percent interest. Despite the efforts channeled into the restructuring strategy Stefanel entered the special administration procedure in September 2019, and a year later, the company was delisted from the Milan Stock Exchange amid declining sales, increased debts and a deteriorating economy.
If a deal goes through, OVS is expected to acquire the Stefanel brand — which currently employs around 200 people in Italy — and take control of its 30 stores.
In the nine months ended Oct. 31, revenues at OVS SpA fell 25.7 percent to 736.7 million euros, largely impacted by store closures during the first lockdown enforced in Italy last March. But the company saw signs of recovery in the third quarter.
The retailer said e-commerce sales increased 50 percent in the same period, signaling that “our brands have been researched through all available channels,” Beraldo said. He noted that the company is expanding its offering to tap into new customers, citing, for example, the introduction of the Piombio men’s wear brand with designer Massimo Piombo — a joint venture in which OVS and Piombo hold a 70 percent and 30 percent stake in the company, respectively.
Adjusted earnings before interest, taxes, depreciation and amortization decreased 60.3 percent to 40.1 million euros. As of Oct. 31, net financial debt stood at 356.9 million euros compared to 395.2 million euros at the end of October last year improved by a strategic review of costs and investments.
Despite positive signs in the third quarter, Beraldo sounded cautious as he said that “in the wake of the current measures that regulate store operations and the uncertainty on the evolution of such measures, it’s hard to evaluate if the advantages we have gathered so far are sufficient to achieve the economic targets set for the whole year, while we are more confident in meeting the net financial position goals we set.”
In the third-quarter sales totaled 361 million euros, up 6.1 percent compared to the same period in 2019, while EBITDA amounted to 38.1 million euros substantially in line with the same period a year earlier.
Following the announcements OVS shares closed up 2.09 percent to 1.03 euro on the Milan Bourse. The company went public in 2015.
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