• Investment Banking

Morgan Stanley and Michael Kors Set New Trend in Retail

Morgan Stanley helped Michael Kors transition from trendsetter to category leader with its 2011 initial public offering.

For decades, the Michael Kors brand of “affordable luxury” had been defined by uncompromised quality and exclusivity, coupled with an active, wearable practicality. This simultaneous sense of accessibility and desirability translated to market success when Morgan Stanley led the lifestyle company’s approximately $1.1 billion initial public offering (IPO) in December, 2011.

The Michael Kors—Morgan Stanley relationship clearly demonstrates the combined power of creativity, innovation and market-building. Starting in the fall of 2010, the firm began outlining a process to position the global luxury brand from trendsetter to category leader through best-in-class execution.

"The Michael Kors name has become synonymous with luxurious American fashion,” says Ian Sugarman, Managing Director and Vice Chairman of Retail Investment Banking at Morgan Stanley. “Our leading equity capital markets franchise was well-positioned to walk the runway and communicate this unique and compelling retail growth story to investors."

In July, 2011, the firm acted as sole placement agent on a $500 million private placement for the global luxury brand. Morgan Stanley Managing Director Bob Shepardson, who led the equity capital markets execution on all of the transactions noted, "Morgan Stanley's initial private placement strategy created the framework for strong shareholder support and allowed for the monetization of over 85% of the company, raising close to $6 billion of value in five transactions in less than two years."

Leveraging the firm’s strong client relationships and deep experience across the retail and consumer sectors in its work with Michael Kors helped to position the trendsetter as a category leader ahead of its IPO. In December, 2011, Morgan Stanley launched the Michael Kors IPO on the heels of strong Black Friday results. Driven by strong investor demand, the IPO transaction was highly oversubscribed.

Challenging retail conditions and market volatility did little to dampen appetite for the Michael Kors IPO, which priced on December 14, 2011, above the indicative pricing range of $17 to $19. The stock sale raised $944 million, and the final IPO deal size was about 26% higher than the deal size at the launch, based on the mid point of the filing range, due to an increase in the number of shares that were offered, as well as the pricing.

Since the IPO, Morgan Stanley has priced three follow-on offerings for Michael Kors. The first was a $1.4 billion offering in March, 2012, followed by a $1.4 billion offering in September, 2012, and a $1.5 billion offering in March, 2013.

"Each public offering achieved excellent price execution. The company's robust performance is a true testament to its world-class management," says Carmen Molinos, a Managing Director in Investment Banking at Morgan Stanley.

Shepardson agrees: "Michael Kors' exceptional performance has been a key driver of investor returns.”

Since the IPO, the store count has more than doubled, with industry-leading comparable-store sales of 26% in fiscal-year 2014.

When a household name like Michael Kors finds such uncompromised success, other similarly positioned businesses are bound to follow. Morgan Stanley’s leadership in executing transactions with best-in-class service for our clients marks more than the start of a trend; it's beginning of a new template for retail growth companies.

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