Image: Zegna

Ermenegildo Zegna Group will go public on the New York Stock Exchange later this year by way of a merger with Investindustrial Acquisition Corp., a special purpose acquisition corporation – or SPAC, the privately-held Italian fashion company announced on Monday. According to a statement from Zegna, which owns Agnona and Thom Browne, as well as its marquee Zegna brand, the Zegna family will retain control of the company with a stake of approximately 62 percent, and the merged entity will have an anticipated initial enterprise value of $3.2 billion and a market cap of $2.5 billion. Zegna will use the $880 million in proceeds generated by the Investindustrial deal to fuel its “continuing growth plans,” including in China. 

In announcing the impending transaction, 111-year-old Zegna touted its “vertical integration and made in Italy luxury textile, clothing and knitwear platform,” which it says ensures the “highest levels of excellence while maintaining heritage of sustainability.” Reflecting on the decision to go public by way of a SPAC deal, Zegna CEO Gildo Zegna said on Monday, “We could have remained private for another 100 years, but the timing was perfect, and the luxury has become very challenging.” He further asserted that the Zegna family “will remain at the company’s helm following the transaction’s completion, and will continue to invest in creativity, innovation, talent, and technology in order to sustain Zegna’s leadership position in the global luxury market.”

Investindustrial founder Andrea Bonomi, said on Monday that “for over thirty years, Investindustrial has invested in and supported both growing and leading Italian brands. We believe in the strength of Made in Italy, which has always been recognized worldwide for quality, craftsmanship, and innovation.” Zegna, he says, is “a group that also includes both a strong family heritage and a leading position in sustainability – one of the pillars in Investindustrial’s investment strategy.”

The deal, which is slated to take Zegna public “later this year,” will be one of the biggest SPAC transactions in the fashion/luxury space to date. The news comes as SPACs have generally surged in popularity in recent years as an alternative to traditional initial public offerings, which are notoriously costly and time-consuming. “From a target company perspective, merging with a SPAC is viewed as a quicker, more efficient and cost-effective route to going public than a more traditional IPO and deal values can be higher,” according to Paul Hastings LLP’s Roger Barron and David Prowse. Meanwhile, from an investor’s point of view, “SPACs offer the opportunity to invest in a private-equity style transaction with the liquidity and regulatory comfort offered by the capital markets.” 

By removing some of the “negotiations with banks and investors,” and the “filing of complex documents with federal regulators,” Proskauer Rose LLP’s Corey Rogoff and Julia Alonzo claim that SPACs typically operate on “a much quicker timeline, and involve fewer parties.” They note that “in this environment, it is not surprising that investors have looked to other means to shepherd more ‘unicorns’ into the market.” And investors are, in fact, looking to other means: more than half of the companies that publicly listed in 2020 by way of a SPAC – or a “blank check” company that “has no commercial operations,” per CNBC. “It makes no products and does not sell anything,” as its primary purpose is to take a private company public through a merger. 

Such enduring SPAC-centric momentum is expected to carry through 2021, including in the fashion/apparel space, with former Gap Inc. CEO Art Peck, for instance, alerting the Securities and Exchange Commission in March that he was raising money by way of his Good Commerce Acquisition Company SPAC with plans to buy companies that sell apparel and accessories. More recently, former Coach executives Jide Zeitlin and Lew Frankfort announced in June that they have partnered to launch a SPAC called Bleuacacia, noting that “this is an exciting time to pursue acquisitions of globally relevant, premium and consumer-facing brands that have a powerful emotional engagement with Millennial and Gen-Z consumers.”

As for Zegna, it will be interesting to see whether it has other M&A ambitions in mind given the overarching trend of consolidation in the fashion industry, particularly in the upper echelon, and in light of its continued efforts to take ownership over its supply chain, which could prove to be a powerful asset should it seek to build out a bigger group of brands of its own. On the supply front, the group’s latest acquisition came just last month when Zegna and Prada announced that they had come together to acquire a controlling stake in Italian cashmere producer Filati Biagioli Modesto in furtherance of a quest to “secure a domestic supply chain and luxury-goods manufacturing expertise.” The two big-name fashion entities revealed that they would each take a 40 percent stake in the Montale-based supplier, which is known for its Italian cashmere and noble yarns, while the Biagioli family will hold on to 15 percent of the company, and newly-appointed CEO Renato Cotto – who recently served as a director at LVMH’s Loro Piana – will assume a 5 percent holding. 

In its release on Monday, Zegna seemed to suggest that more deals might be in the works, with the company making specific mention of its “successful acquisition of the iconic Thom Browne brand” in 2018, which it asserted “demonstrates the strength of [its] M&A strategy and its ability to develop brands.”