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“I got, from both PAI and GECOS, a very clear objective: listing the company after the summer break. Then if during the IPO preparation period they will receive an offer from a trade buyer”¦ they will certainly decide to do the right thing“ |
Roberto Graziani |
INTERNATIONAL. As it prepares for an IPO by the end of the northern summer, The Nuance Group is plotting several key expansion projects, including the opening of a downtown travel retail store in Hong Kong.
The plans were outlined by Nuance President & CEO Roberto Graziani in an extensive and wide-ranging interview with The Moodie Report published yesterday .
Outlining for the first time the timescale, structure and rationale of the IPO, Graziani noted that it would involve a Zürich listing of some or all of the shares held by Nuance’s 50% owner, private equity group PAI Partners. However, he also held out the possibility that long-time shareholder Generale Di Commercio E Servizi (GECOS) might also list some of its shares to aid liquidity.
“I’m expecting, probably before Easter but certainly before the end of April, to have taken a decision on which banks will be with us in coordinating the IPO,” he said. “There will probably be one Swiss and one international bank. We are aiming to be in the market before year-end, possibly just after the summer break.”
Graziani said that the extent of the listing will depend on the market situation at the time and the advice of banks. But he confirmed: “PAI would be ready to either sell its whole 50% in one shot or sell it in a few tranches. At the same time GECOS may want to keep its entire stake, but of course if the advice of the banks were to be for them to sell an additional 5, 6 or 7% to give additional liquidity to the market, then it would be ready to do that.”
Graziani said that the IPO would give Nuance easier and faster access to capital both in terms of equity and debt. This would allow it to grow more effectively and avoid the financial constraints that had shackled it until last October when it refinanced its debt.
He said the nature of the float and the way it is being structured on the Swiss Stock Exchange made it unlikely that any trade competitor would enter the fray, as they would have no control.
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While Nuance was disappointed about losing its core category concessions at Hong Kong International Airport (above) and Changi Airport (below), Graziani questioned the profitability of the winning offers |
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With PAI’s exit strategy clear, Graziani was pressed on the future intentions of the GECOS family-consortium (comprising the Bastianello, Giol and Dina families). He said that GECOS is a long-term investor which finds travel retail an ideal foil to its less cyclical, Italy-focused food retail business.
“What I can say is that I got, from both PAI and GECOS, a very clear objective: listing the company after the summer break. Then if during the IPO preparation period they will receive an offer from a trade buyer”¦ they will certainly decide to do the right thing.”
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“We are working on it [a Hong Kong downtown store]. We are trying to select the right property to do our business. Our business model is identified, clear and ready to be implemented“ |
Roberto Graziani |
Pressed further as to whether GECOS, led by CEO Arturo Bastianello, would sell in such a scenario, Graziani said it was “speculation”, adding cautiously: “I believe there is a price [for any business] that if you don’t sell, you’re not rational and from a business perspective you’re making a mistake – and Mr Bastianello is a rational person. But this is just as true for Nuance as it would be for World Duty Free, Heinemann or any other business. The real question is: what is the right price?
“In any case these are speculations that are not taking us anywhere. We are working on an IPO and we are on valuations that are extremely interesting. That’s not surprising looking at the investor interest in our listed trade competitors. However, we need to be quick to take advantage of such conditions, which could change anytime.”
But Graziani did not shut the door entirely on the possibility of a trade sale. In an interesting aside, he noted: “If you’re asking about, say, the Koreans [Shilla or Lotte] or Lagardère [owner of LS travel retail], do I think Nuance would be a good acquisition? Yes, I think it would be a fantastic acquisition for all of them.”
GEARING UP FOR DOWNTOWN GROWTH
He insisted there was considerable further value in Nuance, suggesting some “very interesting” news set to break in Asia that would offer the group “strong growth – much more than what we have achieved in the past few years, even with the business at Hong Kong and Singapore airports [a reference to the core category concessions at HKIA and the beauty contract at Changi, lost to DFS and Shilla].”
In a swipe at the winning bid levels at both airports, Graziani said: “I believe it is quite clear to show, at least since I took over my position in 2004, that even if we took some aggressive positions in certain tenders, we have never bid at a level where we knew for sure we would have lost money.
“The [winning] bids in Hong Kong and Singapore are giving us the message that to operate in such important hubs you need, however, to be prepared to do that. That’s why we are trying to focus on different opportunities.”
Outlining that change, he noted: “I believe we will do less [airport] concession business, and focus on some more profitable opportunities.”
One of those is a downtown travel retail store in Hong Kong, a development that has been the subject of industry rumour for some time. Graziani confirmed the development but said that plans are still being finalised. “We are working on it. We are trying to select the right property to do our business. Our business model is identified, clear and ready to be implemented. However the location is very important and we need to avoid the risk of compromising the business model by implementing it too quickly.”
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Sydney Airport – “We will stress our offer to the maximum, without, however, forgetting the huge losses we are now incurring” |
SET FOR SYDNEY BID -BUT NO MORE “BLEEDING”
Graziani insisted Nuance would bid for the Sydney Airport duty free contract, now out to market, despite the retailer’s multi-million annual losses in Australia there over recent years (nearly A$33 million/US$31 million in the year ended 31 January 2012, for example).
The loss of Sydney – on current terms at least – would represent a sharp improvement in Nuance’s P&L but Graziani said: “We will bid in Sydney – and seriously. We will try to be as competitive as possible. I think we are the company with the best knowledge of the specific market and our offer will reflect that.
“From a financial point of view we will stress our offer to the maximum, without, however, forgetting the huge losses we are now incurring,” he adding. “Sydney is a big concession. Being very aggressive there, without knowing well the impact of its main challenges – tobacco limitations and currency fluctuation – could be very dangerous. That’s the reason why I’m not expecting crazy bids. In that case we would have a good chance to continue operating down there.
“However, if someone is happy to take the risk of making huge losses, then good luck to them. We value the business there, but we cannot afford to continue bleeding as we have done in the past few years.”
Elsewhere, Graziani said that Nuance was increasingly looking to the Americas for growth, including a forthcoming coming bid in Rio de Janeiro, where the company is set to secure a key local partnership.
