Shoemaker Tod’s, renowned for its driving shoes, is set to go private as the Della Valle family, the company’s founding family, plans to join forces with L Catterton, a private equity firm backed by LVMH, to acquire the remaining shares of the company. The deal values Tod’s at €1.42 billion ($1.5 billion), but minority investors are advised to wait for a higher price.
Tod’s has been grappling with the decline in demand for its formal shoes, which has been overshadowed by the surge in sneaker culture. Moreover, the slowdown in the luxury goods market has further complicated the brand’s recovery. However, with the Della Valle family and L Catterton taking control, they have a unique opportunity to implement drastic measures and revive the Tod’s brand. This may entail reducing sales through third-party retailers, which is a crucial aspect of Tod’s business model. Additionally, they can focus on reinvigorating the luxury sneaker brand Hogan and expanding the high-end shoe brand Roger Vivier.
The consortium’s offer of €43 per share to minority shareholders represents an 18% premium over Friday’s closing price and a 42% premium over January’s low. It is also close to the 12-month high reached in July. However, some consider this offer as opportunistic, given the impact of the normalization of industry demand on luxury stocks. Minority shareholders would be selling their shares at a time of relatively low valuation, especially with the slower recovery in China and cautious US aspirational consumers.
Despite the challenges, Tod’s turnaround efforts are yielding positive results. The company reported improving trends in January and expressed optimism about future profitability. LVMH has been a minority shareholder in Tod’s for some time and will retain a 10% stake even after the deal. The involvement of L Catterton strengthens the ties between the two companies, and there is a potential for LVMH to eventually acquire Tod’s completely. It is crucial for minority shareholders to ensure they benefit from any potential upside that may arise from such a scenario.
Following the announcement, Tod’s shares surged by 18% in Milan, indicating optimism that a higher offer may be on the horizon. Notably, the current bid is slightly higher than the €40 offered by the Della Valle family in August 2022, which did not garner sufficient support. The proposed price in the recent deal is likely just the starting point and may attract the interest of other luxury groups struggling with their turnaround plans.
Ultimately, the outcome hinges on the determination of Tod’s minority shareholders. They have a rare opportunity to maximize the value of their holdings and should not let it slip away. Just like a much-awaited shift in the fashion cycle, they should seize this chance to their advantage.
Useful links:
– Bloomberg: Investment powerhouse backed by LVMH joins Tod’s bidding war
– FashionUnited: Why L Catterton’s deal for Tod’s is so crucial
