A Milan-based market source told WWD that Kering “is seriously thinking of a takeover of Moncler. It has the liquidity, and it is already discussing the deal with a number of banks.”
The source estimated the deal could be in the range of 13.5 billion euros to 14 billion euros, a 30% to 40% premium on a capitalization of 10 billion euros. “It could take a matter of days, perhaps two weeks,” he forecast, viewing the deal as a response to the recent LVMH Moët Hennessy Louis Vuitton proposed acquisition of Tiffany.
Moncler’s chairman, CEO and shareholder Remo Ruffini toned down the speculation, stating that he “would like to clarify that from time to time he maintains contacts and interacts with investors and other sector participants, including the Kering group, in order to explore strategic potential opportunities to further promote the successful development of Moncler. At the moment, there is not any concrete hypothesis under consideration.” Kering had no comment on the rumors.
In a Bernstein report the same morning, analysts Luca Solca, Can Yuan and Maria Meita wrote that Kering “seems now short of options to fulfill its ambitions in hard luxury, other than a blue-sky mega-merger with Richemont.”
Bernstein believes Ruffini and his senior management team “have driven the brand in near perfect manner — taking it to unprecedented heights. Adding value by acquiring Moncler is therefore not easy — especially if a significant premium was paid to take it over. For sure, Moncler has yet to develop globally effective digital distribution — the skills and scale of Kering would be very useful on this front. Equally, Moncler would also benefit from stronger negotiating power when it comes to store locations.”
Buying Moncler “would do nothing to enhance Kering’s position in hard luxury.”
At the same time, the French group “would clearly benefit from diversification: given the extraordinary success of Gucci, EBIT has become [about] 80% dependent on it. Moncler would be another step in trying to balance this out. Kering would also secure a first-class management team — assuming they would still all be involved.” In October, Solca argued that Moncler has built an “enviable position” at the top of the outerwear market. “Moncler has done virtually everything right in recent years, from relentless product newness to achieving unprecedented EBIT margins [29.2% in 2018] at small scale. No competitor has been able to match their casual-plus-expensive product offer.”
In February, Kering chairman and CEO François-Henri Pinault expressed readiness to add brands to the “backbone” represented by Gucci, after a year of purging the group of non-core brands including Puma and Volcom as part of its transformation into a pure luxury player.
“Our ambition is to make Kering the most influential group in the world in terms of creativity, social and environmental responsibility, innovation and financial performance,” Pinault declared. “We have very important financial resources, which are growing regularly, and we are therefore in a position to seize opportunities.” Pinault also said at the time that Kering needed “brands that complete our portfolio, according to a very precise analysis of our brand portfolio, and we are also very vigilant not to overpay for brands, as has been the case recently,” likely pointing to the hefty $2.1 billion price tag paid by Capri Holdings, formerly known as Michael Kors Holdings, for Versace in September 2018. Kering has been at the center of several M&A speculation, said to be circling Salvatore Ferragamo, Valentino and Versace itself.
Moncler is a textbook success story, spearheaded by Ruffini, who developed the brand from a dusty collection of utilitarian down-filled jackets with mostly local distribution into a global luxury fashion label. Going for what he called his “dream brand,” Ruffini bought the company in 2003, spearheaded its global expansion, publicly listing it in Milan in December 2013 and reaching the $1 billion in sales milestone in 2016, while wiping out its debt. He has driven Moncler’s growth by forming close relationships with designers from Nicolas Ghesquière to Junya Watanabe, Giambattista Valli, who designed Moncler Gamme Rouge, to Thom Browne, who was in charge of the Moncler Gamme Bleu line for men. After 10 years of a successful run with the latter two projects, Ruffini fearlessly overturned the company’s business model and strategy, launching Moncler Genius, a series of drops and capsules with designers ranging from Pierpaolo Piccioli to Simone Rocha and Craig Green, to name a few. As per the latest financial reports, consolidated revenues at Moncler grew 14% to 995.3 million euros in the first nine months of the year, despite the impact of social unrest in Hong Kong.
After eight years, Eurazeo in March said it has exited the last of its stake in Moncler, selling 4.8% of the company for 445 million euros. That’s more money than Eurazeo and its co-investors paid for 45% of the company in 2011, making for one of the most successful private equity investments in fashion in recent memory.
Marco De Benedetti, managing director and co-head of Carlyle’s European Buyout Group, and an early investor in Moncler, is vice chairman of the brand. As of March, Ruffini holds more than 66.9 million shares in Moncler through Ruffini Partecipazioni Srl and 151,648 directly; chief corporate and supply officer Luciano Santel holds 216,000 shares; chief marketing and operating officer Roberto Eggs holds 112,000 shares; and Virginie Morgon, CEO of Eurazeo, holds 9,770 shares.
Moncler shares in one year have risen 45.86%.
This story was reported by WWD and originally appeared on WWD.com.