Puig looks to raise Euro 2.

5bn in IPO

Beauty group Puig looks to raise €2.5bn in IPO Family business behind Charlotte Tilbury
and Paco Rabanne plans to list in Madrid and other Spanish stock exchanges Puig,
owner of make-up brand Charlotte Tilbury, says its business is more resilient than
others because it suffers less from consumers retrenching © Slaven Vlasic/Getty
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[Link] the FT's WhatsApp channel Puig, a family-owned Spanish beauty group, is
preparing for an initial public offering in the coming weeks through which it aims to
raise more than €2.5bn in the biggest flotation in the sector in years. The Barcelona-
based company, which owns perfume and make-up brands ranging from Paco Rabanne
to Charlotte Tilbury, announced its plans to list in Madrid and on other Spanish stock
exchanges in a regulatory filing on Monday. Bankers have valued the 110-year-old
business at between €8bn and €10bn. The company said it wanted to raise about
€1.25bn through a primary offering, followed by a “larger” secondary share sale that
would take the total sum raised to more than €2.5bn. The flotation of Puig, which bills
itself as a “premium beauty” group, is likely to be the biggest in luxury in terms of
capital raised since Ermenegildo Zegna in 2021. But it could yet be eclipsed by Golden
Goose, an Italian footwear brand, which is also expected to float this quarter. The Puig
family intends to retain a majority stake in the business, but it has not said exactly
what percentage of stock it will sell. The family will hold “A” shares, each of which
confer 5 votes, while outside investors will be offered “B” shares, which confer a single
vote. Puig’s move comes as Europe’s market for initial public offerings has enjoyed the
strongest start to a year since the pandemic, following a prolonged slowdown. Rising
stock indices and the prospect of interest rate cuts have encouraged more companies
to seek listings, including dermatology group Galderma, controlled by Swedish buyout
group EQT, which raised SFr2.3bn ($2.5bn) in March. However, not every deal has
gone smoothly. Shares in German beauty retailer Douglas fell as much as 9 per cent in
their Frankfurt debut last month. Puig’s flotation comes as the luxury sector grapples
with the end of a post-pandemic spending boom. But the group insisted that it was
resilient in the face of retrenching consumers because the unit price of its fragrances
and make-up was lower than for watches, handbags and other luxury products. In
2023 the company, which operates in 32 countries and also owns Carolina Herrera and
Nina Ricci, reported record net revenues of €4.3bn and net profit of €465mn, up 16 per
cent from the previous year. Marc Puig, chair, chief executive and the third generation
of his family to lead the business, said it was “important for any family business to
have the right checks and balances in place, particularly during generational
transitions”. “We believe that the balance of being a family-owned company that is
also subject to market accountability will allow us to better compete in the
international beauty market during the next phase of the company’s development,” he
added. Recommended News in-depthPuig SA How deal-hungry Puig became beauty’s
‘flexible’ conglomerate Puig has led the company since 2004 and said he would be the
last generation of the family to head the business, even though he has no plans to step
down. “We strongly believe that building premium brands requires long-term thinking
and having a family behind a company fosters this long-term approach, because they
tend to care in equal measure about the time horizon of the next generation and the
next quarter,” he said. The company said it “will continue to selectively evaluate” more
potential acquisitions, but signalled that a more immediate use of the funds raised
would be to buy out minority interests in brands it has already acquired. Puig is small
compared with sector-leading peers L’Oréal and Estée Lauder, but has grown rapidly
through acquisitions in the past decade, striking 11 deals in the past 12 years. Those
included the purchases of British make-up business Charlotte Tilbury, French brand
Jean Paul Gaultier and Belgian fashion house Dries Van Noten.

Global supply of equities shrinks at fastest pace in decades

Uncertain executives are favouring share buybacks over tapping buoyant markets to
fund investment

The global supply of public equity is shrinking at its fastest pace in at least 25 years, as
economic and geopolitical uncertainty weighs on new share sales while companies
keep buying back large volumes of their own stock. The figures, from JPMorgan
analysts, confounded the bank’s own expectations and suggest a lingering lack of
confidence among executives. Rising stock markets and relatively strong economies
should, in theory, encourage companies to raise funds by selling new shares at high
prices rather than spending cash to buy them back. Yet data shows that the global
universe of public equities has already shrunk by a net $120bn this year, exceeding the
$40bn taken out over all of last year. That puts the net figure on course for a third
consecutive year of decline — a phenomenon not seen since the bank’s data series
began in 1999. JPMorgan’s data showed buybacks this year continuing at roughly the
same pace as the past three years, putting them on course to reach about $1.2tn by
December. Initial public offerings and other share sales, however, have fallen short of
forecasts. The two “puzzling” trends reflected “persistent uncertainty” among
companies around the world, said JPMorgan’s Nikolaos Panigirtzoglou. Equity offerings
were expected to pick up this year as investors became more confident that the US —
home to the world’s largest equity market — would avoid a recession. But lingering
concerns that inflation may rise again, spurred by that strong economic growth, means
“this hasn’t really happened”, Panigirtzoglou said. “This suggests some people do not
think we are out of the woods.”

As recently as November the bank’s team forecast supply rising by $360bn in 2024 as
already listed companies reduced the pace of buybacks while newer companies
pushed ahead with public offerings. Stocks have rallied strongly this year, finishing the
first quarter with their best start to the year since 2019, buoyed by hopes of continued
economic growth and a boom in artificial intelligence-related companies. The MSCI All-
Country World index has added 6.4 per cent since the start of the year. In the US, the
S&P 500 has added 7.9 per cent.
While last month’s successful IPO of social media group Reddit lifted hopes that other
long-awaited listings could soon follow suit, bankers have cautioned that many
company owners remain sufficiently worried about interest rate uncertainty and
expected volatility around November’s US presidential election to delay floats until
2025. The number of listed companies in the US has fallen from more than 7,000 to
fewer than 4,000 since 2000, according to Wilshire, the index provider. A similar trend
has unfolded in Europe and the UK. Smaller companies hoping to raise funds but wary
of the financial and regulatory burdens associated with being public are still turning to
private markets or venture capitalists, according to strategists. “You don’t have nearly
as many companies going public because of the growth of private equity,” said David
McGrath, chief equity strategist at Oakworth Capital Bank in Alabama. “We’ve also got
to a point where it’s become harder for companies to grow sales. If you want to boost
earnings per share, it’s easier to make the denominator smaller by buying back stock,”
he added.

Despite current higher interest rates making debt relatively more expensive, few
expect any rapid shift back towards issuing more equity. “It’s certainly less of a no-
brainer now to substitute equity with debt. But debt costs are still lower than in the
1990s when de-equitisation took off,” said Robert Buckland, a former chief global
equity strategist at Citigroup who coined the term 20 years ago. “The private markets
aren’t going to disappear overnight.” One effect is that indices based on a specific
number of stocks — such as the S&P 500 or the Russell 2000 — now cover much larger
segments of the market than they used to, potentially skewing risks and returns for
fund managers who have used them as long-term benchmarks. While the S&P 500 has
risen more than 400 per cent since 1998, the threshold for being considered a large-
cap stock has risen more than six-fold when considered as a proportion of the market
rather than being ranked by number, according to Wilshire’s calculations.