Carlyle, CVC, and other private equity firms are vying to acquire SAMSONITE. Why has it become such a hot commodity?

Zhitong App has learned that SAMSONITE (01910) is reportedly considering privatization. Informed sources revealed that Carlyle, KKR & Co LP, as well as other private equity firms such as Bain Capital and CVC Capital Partners, have expressed preliminary interest in potentially acquiring SAMSONITE. These companies are conducting early assessments to determine whether to bid for the company. Following this news, on the afternoon of March 7th, the company's stock price surged by over 2% at one point, narrowing to within 1% by the close.

On February 27th, there were market reports stating that SAMSONITE is exploring options including privatization and has received acquisition intentions from potential buyers. Some private equity firms have been studying transactions involving SAMSONITE, planning to acquire the company and then relist it on another market such as the United States at a higher valuation. Encouraged by the positive news, SAMSONITE's stock price soared over 18% to HKD 27.5 at one point on that day, reaching a new high since August 2023.

It is understood that CVC Capital acquired SAMSONITE for $1.7 billion in 2007, after which the company chose to list in Hong Kong, with the current total market value of the company reaching HKD 42 billion. Private equity sources indicate that SAMSONITE's rolling price-to-earnings ratio is less than 12 times, slightly below the average valuation level of 15-20 times for optional consumer goods. The trend of stock prices to some extent reflects the market position of listed companies, and companies dissatisfied with market pricing may choose to go private and delist.

It is worth noting that on February 27th, Morgan Stanley increased its holdings of SAMSONITE by 12.0444 million shares at an average price of approximately HKD 25.94 per share, involving around HKD 312 million, increasing its stake from 5.76% to 6.59%. This increase demonstrates Morgan Stanley's recognition of the brand value and market prospects of SAMSONITE, which may have a positive impact on SAMSONITE's stock price.

Benefiting from the recovery in travel demand after the epidemic, luggage demand has also rebounded, leading to SAMSONITE's impressive performance in the first three quarters of 2023. The financial report shows that in Q3 2023, SAMSONITE achieved revenue of $958 million, a YoY increase of 21.2%; net profit attributable to shareholders was $115 million, a YoY increase of 101.6%. In the first three quarters of the previous year, SAMSONITE's revenue was $2.734 billion, a YoY increase of 35.6%; net profit attributable to shareholders was $268 million, a significant YoY increase of 142.4%. On March 4, a report from Morgan Stanley pointed out that despite the rise in stock price, SAMSONITE's valuation still offers a discount compared to its global peers. They believe that the growth in travel demand will support its sales outlook, with the growth of its subsidiaries Tumi and the Asian market expected to boost its profit margin. Encouraging recent data in the tourism industry leads the bank to estimate that SAMSONITE's management will provide a more confident outlook when announcing its performance in the future.

On March 5, a report from Citigroup stated that SAMSONITE will announce its 2023 annual performance on March 13. It is estimated that the revenue in the fourth quarter of last year increased by 20% YoY to $980 million, with a net profit of $96 million. Looking ahead to this year, the continued growth in travel demand will drive luggage sales performance. The company's brand, product line, sales channels, and market diversification will enhance its business capabilities, with estimated revenue growth of over 9% for the company this year.