M&A Talk Swirls Around Kering, Richemont Following Blog Report

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Mimosa Spencer and WWD Staff
·3 min read
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Is Compagnie Financière Richemont one of a few potential targets for Kering? The French luxury group has cleaned up its portfolio over the past few years, further accenting its focus on luxury, and said it’s on the lookout for potential acquisitions.

Shares in Richemont Monday closed up 3 percent. The spike followed a report from online publication Miss Tweed published Sunday that Richemont’s founder and chairman Johann Rupert rebuffed an informal offer from Kering in January. The report did not cite sources. Officials at both Kering and Richemont declined to comment.

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Financial analysts have long considered the logic of such a deal, with Kering’s stable of high-end fashion brands, including star label Gucci, seen as potentially fitting well with that of Cartier owner Richemont, which boasts a number of watch and jewelry labels as well as Chloé and Dunhill. LVMH Moët Hennessy Louis Vuitton’s purchase of Tiffany & Co. has added pressure on its rivals in the sector to bulk up, some observers say.

Not only did the acquisition shrink the potential pool of targets for luxury groups, but it also strengthens Tiffany’s position. Backed with the business expertise and financial weight of LVMH, the U.S. label is set to play a bigger role in boosting competition in the jewelry segment.

Rupert has publicly dismissed talk of a merger with Kering, and said last November, after Richemont forged a three-way deal with Alibaba and Farfetch to ramp up digital luxury sales, that the Swiss-based company is not for sale.

“I was joking with my colleague that I wouldn’t mind buying Buckingham Palace in London for the Richemont head offices, but I don’t think it’s for sale. [Richemont] is not for sale, and it’s never been for sale. We’re not interested in selling. We are not interested in mergers.

“We have already cooperated [with Kering] in terms of eyewear, and we are prepared to do deals as long as they make commercial sense. We don’t — unlike some of our competitors — have mortal enemies [in this business], and we are prepared to work together where it makes the most sense,” said Rupert.

Rupert further strengthened his links with the Pinault family that controls Kering via the Alibaba-Farfetch deal. The Pinaults’ family holding Artemis increased its stake in Farfetch as part of the trilateral deal.

Kepler Chevreux, in a report published Monday, noted that Kering’s market capitalization is around half more than that of Richemont and suggested Kering lacks the resources for a full takeover, even if theoretically it could pay a premium for the unlisted B shares held by Rupert, which would give it control of Richemont.

Rupert controls 50 percent of Richemont through his B shares.

Kepler Chevreux said speculation of a tie-up “amid Kering’s limited hard luxury assets and Richemont’s limited soft luxury assets has circulated for years, further encouraged by the LVMH takeover of Tiffany. Potentially a tie up would create more economic value, but potentially not shareholder value for Richemont A holders (those with listed shares) depending on how any deal was arranged.”

Kering shares closed down 2.86 percent, or 17 euros, to 576.60.

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