Shares in Italy's Safilo slumped on Tuesday as the main rescue option for the maker of Dior and Gucci eyewear disappeared with the collapse of talks with private equity fund Bain Capital.
Safilo said late on Monday private equity funds had formally withdrawn from talks without presenting any offers and its board would meet by August 4 to consider its next move.
Shares in the company, which has net debt of more than 600 million euros ($856.6 million) and has just secured a delay in a debt repayment, fell 9.62 percent to 0.385 euro.
Its creditor banks include Intesa Sanapolo and UniCredit. It has a market cap of 114 million euros.
With private equity funds out of the game, and with the company facing liquidity issues... the clock is ticking rapidly, UniCredit analyst Davide Vimercati said in a note.
He said Safilo could buy time by selling retail activities, that could be worth around 150 million euros.
But we believe an M&A deal with an industrial player is at this stage the only option that could provide a long-term solution to Safilo's financial issues.
Bain Capital remained the last contender for a stake in Safilo after Pai Partners pulled out.
Industrial players Marcolin and Luxottica have been mentioned as potential partners in the past. A source close to Marcolin has said Safilo was not discussed at its June board meeting and analysts have deemed a deal unlikely and prefer bigger competitor Luxottica.
We believe that the focus of the market will now be on Luxottica as a potential predator of Safilo given... its larger scale, its strong cash flow generation and its management's strong track record in acquisitions and integrations, Centrobanca's Simone Ragazzi said in a research note.
This would strengthen Luxottica's leadership of the eyewear market without it requiring a capital increase, breaching its banking covenants or paying out a significant amount of money.
Luxottica is due to report its first-half results later on Tuesday and will hold a conference call.
The company's CEO has said before it was not interested in Safilo.
Ragazzi said FGX -- whose main shareholder Berggruen Holdings has said it was interested in Safilo, and Marcolin were unlikely predators due to the mass market position of the former and the smaller dimensions of the latter.
(Italian eyewear group) De Rigo could be a possible predator. It is of similar size to Safilo with 585 million euros of sales, he said.
Safilo, which has also seen the crisis hit demand, got a breather when banks agreed to delay to December 31 payment of a finance installment due in June. It also won a waiver on financial covenants linked to the financing arrangement.
It is not the only Italian company that has faced an uncertain future of late. Financially strapped fashion firm IT Holding (ITH.MI) went into special administration earlier this year.
Italy's business and financial community has a track record in pulling off deals to ensure the survival of domestic players.
Last year, a group of Italian investors rallied to haul airline Alitalia out of a financial nosedive at the behest of Prime Minister Silvio Berlusconi.
(Writing by Nigel Tutt; Editing by Hans Peters) ($1=.7004 Euro)