Alessandro Benetton does not have to take his company private in order to restructure it. After all, the Benetton family owns 70 per cent of the eponymous fashion label. However, the deputy executive chairman is rich enough that the €280m or so it will cost him to buy out the one-third of the company not already owned by Edizione, the family holding company with €7.2bn of net assets, could be worth it. With a rigorous restructuring coming up, minority investors could be a distraction he does not need.
There is much work to be done. In the past, the Benetton family has allowed emotion to cloud business decisions, particularly over the value of its products. Benetton markets itself as a luxury retailer but shoppers are more likely to compare its pricey products to fast-fashion houses such as Zara or Hennes & Mauritz. As a result, Benetton has experienced zero sales and earnings growth over the past decade and shareholders have lost three-quarters on their investment.
There are some indications that Mr Benetton (a former private equity manager) is changing the company for the better. Last June, he appointed a head designer for the first time, a position that is de rigueur for other fashion labels. Before then, design decisions were made on a consensus basis.
But despite the good signs, the risk of holding Benetton shares is greater than the probable rewards. The label has years of restructuring ahead of it and Mr Benetton will almost certainly cut the dividend to aid the company’s revamp, something that may further depress the share price in the short term. Edizione has offered minority shareholders about €4.60 a share, a premium of 50 per cent to the undisturbed 30-day volume-weighted average share price, investors should probably take the money rather than risk a very uncertain future.
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