Birkenstock is getting ready to walk the IPO runway. Wall Street hopes that this will be a victory stroll for Birkenstock Holding plc (BIRK proposed) – the British parent of the iconic German sandal company. The sandals’ design heritage goes back to 1774. “Barbie” wore a pair of light pink leather Birkenstock Arizona slides in the final scene of this summer’s blockbuster movie – giving the brand a fountain of fresh fashion buzz ahead of the IPO.
The IPO’s pricing is set for Tuesday night, Oct. 10, 2023 – just two days after Israel declared war on Hamas, the Palestinian Islamist group, following the deadly surprise assault by Hamas on Israel on Saturday. The three major U.S. stock indexes fell at the start of trading on Monday (Oct. 9, 2023) as oil prices jumped and investors avoided stocks in a flight-to-safety bid, Bloomberg reported. Stocks swung around Monday afternoon – erasing earlier losses and driving the Dow Jones Industrial Average up 200 points – after Federal Reserve Vice Chair Philip Jefferson said the Fed could “proceed carefully” with respect to any further increases in interest rates.
Birkenstock’s IPO would raise about $1.5 billion, if the deal is priced at the $46.50 mid-point of its $44.00-to-$49.00 range on 32.26 million shares, according to the prospectus.
The profitable footwear company would have a valuation of about $8.7 billion, based on an IPO price at the $46.50 mid-point.
Birkenstock’s shares are expected to start trading on Wednesday, Oct. 11, 2023, on the New York Stock Exchange.
Goldman Sachs, J.P. Morgan and Morgan Stanley are leading the team of 11 joint book-runners, which includes BofA Securities, Citigroup, Evercore ISI, Jefferies, UBS Investment Bank, BNP PARIBAS, Bernstein and HSBC. The co-managers’ team includes another 11 investment banks.
The Birkenstock IPO – at $1.5 billion –- will be the third-largest IPO so far this year. It will rank only behind Arm Holdings plc’s (ARM) $4.87 billion IPO in September and J&J spinoff Kenvue’s (KVUE) $3.8 billion IPO in May.
Of the 32.26 million shares in the IPO, the company is offering only 10.75 million shares. The selling shareholder, private equity firm L Catterton, is offering 21.51 million shares. L Catterton is backed by LVMH, whose luxury brands include Dior and Louis Vuitton couture, Moet and Chandon Champagne, and jewelers Bulgari and Tiffany & Co.
A valuation of $8.7 billion equals twice what L Catterton paid for Birkenstock in 2021 – which was about 4 billion euros – or US$4.35 billion, according to Reuters. (When debt is included, the 2021 purchase price has been pegged at about US$4.8 billion.)
Birkenstock Holding plc intends to use the IPO proceeds to pay off some debt, according to the prospectus. The company stands to raise about $500 million, if the IPO is priced at the $46.50 mid-point, or about $526.75 million, if the deal is priced at the $49.00 high end.
The company will not receive any proceeds from the sale of the selling shareholder’s stock.
The family office of Bernard Arnault, the CEO of LVMH, and cornerstone investors are in for an aggregate of up to $625 million of stock – or about 42 percent of the IPO.
Fashion Pedigree and Profits
Birkenstock’s slide sandals – known for their wide straps and big buckles with a cork and latex footbed that molds to the wearer’s foot – typically sell for around $130.00 to $210.00 a pair for women’s leather styles on the company’s websiteor for around $140.00 to $210.00 a pair at Nordstrom, which is among the upscale retailers that carry the brand.
A Dior by Birkenstock collaboration appeared in Dior’s fall 2022 runway show during Paris Men’s Fashion Week. The sandals and clogs sold out shortly after hitting the retail market, Footwear News reported in late May. (You can see the Dior by Birkenstock men’s Milano Sandal in pastel green – price: $1,100 – at Dior.com.)
The average Birkenstock customer in the United States owns 3.6 pairs, the prospectus says.
For the 12 months that ended March 31, 2023, Birkenstock Holding earned net income of $165.42 million on revenue of $1.45 billion. (These figures are in U.S. dollars converted from euros.)
For the nine-month period that ended June 30, 2023, Birkenstock reported that net income fell to $108.53 million from $136.03 million in the year-earlier period.
In contrast, revenue rose for the nine-month period that ended June 30, 2023 – to $1.18 billion – from $970.66 million for the year-earlier period, according to the prospectus.
The number of units sold – pairs of Birkenstock sandals and other styles of shoes – increased by 5 percent for the nine months ended June 30, 2023, compared with the year-earlier nine-month period, the prospectus says.
Stay tuned.
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