Technogym S.p.A.; market cap as of 07/05/2016: €759.600m


About Technogym

Technogym is a manufacturer of equipment for sports and training based in Cesena. In 1983, the Italian entrepreneur Nerio Alessandri, founded Technogym at age of 22. Mr. Alessandri began building exercise equipment in the garage of his home. Today, Technogym is the leader in wellness and fitness in Europe and the second player worldwide. It employs more than 2000 people and it has branches in U.S.A., Brazil, Japan, U.K., Germany, Benelux, France, Spain and Switzerland. The company enjoys a very well diversified client-base, including about 65,000 wellness centres and 200,000 households. There are no crucial clients generating more than 10% in revenues for the Group, therefore Technogym is able to keep a great bargaining power with its sales partners. Notwithstanding its size and its global reach, Technogym maintains many features of the typical Italian family business. The founder and majority shareholder Nerio Alessandri is the President and the CEO while his brother and partner in business covers the role of Vice President of the Group. In 2015 Technogym made €511.786m of revenues, 90% of which coming from exports in more than 100 countries. Net income has been continuously growing during the last years: from €1.554m in 2013 it reached €28.345m in 2015.

Technogym was chosen as Official Supplier of five editions of the Olympic Games: Sydney 2000, Athens 2004, Torino 2006, Beijing 2008 and London in 2012 and it will be exclusive official supplier for the Olympic Games Rio 2016. In addition, many famous sports clubs around the world have been collaborating with Technogym for years.

Technogym Performance

During the last years, the company has been growing fast increasing at the same time margins and net income, dramatically over performing its peers. First of all, Technogym delivers an outstanding ROE figure that in FY2015 surpassed the threshold of 65%. The average ROE in the industry is in the range of 7% to 10% and one of the best performers is Nautilus Inc. with a FY2015 ROE of 23.57%. Secondly, Technogym has been able to grow faster than competitors both in sales and in operating margins: the industry average sales growth in FY2015 has been 7.09% compared to the Technogym’s 10%. Moreover, the firm’s EBITDA margin of 16.90% largely outperformed the industry average of 10.72%. There is an extremely positive market sentiment for the company and analysts are forecasting long-term growth for Technogym supported by focused capital expenditures. Finally, fundamentals are extremely positive and there is room for further expansion and growth worldwide. Analysts at Mediobanca estimated an exponential growth in the upcoming 5 years for Technogym. Revenues are expected to grow at a constant rate of 6% per year finally reaching €688m in sales in 2020. EBITDA is expected to grow from €86.681m in 2015 to an amazing €143.2m in 2020. Net income is estimated to grow by 24% on a yearly basis.


Source: Company Prospectus

IPO Rationale

Since the beginning of the year, equity markets have been characterized by bearish trends and remarkable volatility. This is the reason why many firms decided not to list in Q1 2016. Specifically, the Q1 2016 has been defined as a “disastrous quarter” for IPOs, with downsides of 30%-40% globally. Raffaele Jerusalmi, the CEO of Borsa Italiana, is expecting 20 to 30 IPOs during the next quarters of 2016 as a result of improving market conditions.

However, after a careful review of the factors at play, Technogym decided to go public in this challenging market environment also considered shareholders’ needs and markets opportunities. First of all, a minority shareholder, the Private Equity Arle Capital Partners, which invested in the company in 2008, had already held the Technogym stake in its portfolio longer than the usual private equity investment horizon and it needed to monetize, at least partially, the underlying investment. Arle controlled its 40% stake in Technogym through a subsidiary based in Luxemburg named Salhouse Holding. In addition, people familiar with the matter said that Arle had a clause in the contract that forced the fund to divest before 2016. As an alternative to the IPO, Arle together with Technogym also considered selling Arle’s stake to other private equity investors. However, it appeared difficult to find an investor willing to buy a particularly large stake in a fast growing firm despite remaining a minority shareholder. On the other hand, Mr. Alessandri has absolutely no intention to give away his control of the business. Since the public offering consists only of secondary shares and therefore there is no capital increase embedded in the deal, the company will not obtain new funds from the deal. However, the IPO could be beneficial to the company’s growth ambitions, even if indirectly. Indeed, after the IPO, the company will crystallize its equity valuation and gain visibility. These are invaluable features for a company which aims to be a global leader in the fitness sector. Moreover, taking the company public represents the climax of Mr. Alessandri entrepreneurial dream: he brought the company from his garage to the stock exchange.

Offering structure

Technogym had filed the draft prospectus for the offering to CONSOB (the Italian financial markets regulator) on the 22 February 2016 and got the final approval on the 21st April 2016. The roadshow started on the same day in Milan and touched London, New York, Boston, Paris and Frankfurt. The offer closed on the 28 April and the company got effectively listed on Borsa Italiana (the Italian Stock Exchange) on the 3 May. The Technogym ticker has been decided to be TGYM.

The IPO was open to institutional investors only and it dealt with a 25% stake of the company, the shares previously owned by Arle Capital Partners Ltd. Of the 50m shares on sale, 25.365m were assigned to 19 Italian specialized investors, while the remaining 32.135m shares were assigned to 44 foreign institutional investors. The total demand for shares had been four times higher than the number of shares offered. The initial price range was set between €3 and €3.75 and finally the opening price was €3.25, which made Technogym S.p.A’s market capitalization equal to €650m.

For what concerns the valuation of the company, analysts at Mediobanca highlighted an average industry EV/EBITDA of 13.6x which for Technogym means a valuation of €1.21bn (FY2015 EBITDA €89m). Adding net debt of last fiscal year (€38.1m), the final enterprise value of the company is estimated at €1.24bn.


Source: Company Prospectus

Market Reaction

Despite concerns about the risky market environment during the Q1 2016, Technogym IPO has been a great success and the stock jumped in the first day. The IPO took place on 3 May 2016 and when the Milan Stock Exchange closed the TGYM price reached an astonishing €3.62 meaning an 11.38% increase from the €3.25 price set at the opening. As of 07/05/2016, the stock reached a price of €3.80 consolidating in the days after the IPO.

Taking into account the listing price and the FY2015 pro-forma results, Technogym’s P/E ratio equals 23.5, to be compared with the average P/E ratio of the company’s major European peers ranging from 18.3 and 29.1.


Source: Bloomberg


Goldman Sachs International, J.P. Morgan Securities plc and Mediobanca acted as Joint Global Coordinators and Joint Bookrunners. Mediobanca also acted as Sponsor. Nextam acted as Co-lead manager.Cleary Gottlieb Steen & Hamilton LLP acted as legal advisor to the Company, and Chiomenti Studio Legale acted as legal advisor to the Selling Shareholder, while White & Case LLP acted as legal advisor to the Joint Global Coordinators. The Company’s auditing firm is PricewaterhouseCoopers S.p.A.

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