Richemont rejected Kering’s merger proposal in January, report says
Gucci owner Kering reportedly approached Richemont, Cartier’s parent company, earlier this year with a proposed merger, but Paris-based Kering reportedly made no attempt to tempt its Swiss counterpart. According to Reuters, her former European luxury correspondent Astrid Wendlandt reported on her website on Sunday that the chairman and controlling shareholder of Richemont, Johann Rupert, had been approached by the chairman and CEO of the French luxury group Kering, François-Henri Pinault, in as part of a possible merger in January. However, Rupert rejected the informal “cash and stock” offer and “did not submit [it]»To the board of directors of the Swiss conglomerate.
“Rumors of a possible Richemont and Kering merger have been circulating for years,” according to Reuters, “but have intensified in recent months after LVMH’s takeover of American jeweler Tiffany pressured rivals to expand. . ” Such growing speculation – coupled with slowing sales of Kering’s flagship brand, Gucci – prompted Pinault to briefly touch on the subject during a Q4 conference call in February, saying “Kering’s financial situation is very Sense.” , specifically asked about the “recurring rumors” that Kering could join Richemont, Pinault said that Richemont “is a group that we know well, it is one of our partners who gave us a license for their glasses so we are in regular contact. But this is a group that is controlled by a family, like Kering, and there is nothing else about it.
At the same time, Kering claimed that 2021 would be a “year of investments”. Bernstein analyst Luca Sulca suggested that these “will be primarily digitally focused and will be deployed on a variety of fronts: 3D, virtual showrooms, social media, AI-powered CRM programs, immersive experiences, as well as internalization of e-commerce and a complete shift to electronic concessions ”, but could also extend to mergers and acquisitions, as a broader trend of M&A transactions follows the onset of the COVID-19 pandemic.
In a Monday note, UBS said in a note “that a deal between Kering and Richemont would make strategic sense and create a luxury powerhouse capable of challenging LVMH’s dominance in the market,” as Reuters reports. “The combination of the two mega brands of the soft and hard luxury industry, Gucci and Cartier, could reduce Kering’s higher perceived fashion risk and the perception of mismanagement of Richemont’s smaller brands in its portfolio.
Meanwhile, Bernstein upgraded Richemont to outperform Monday, but without mentioning Kering’s purported proposition, and instead cited the potential benefit ahead of the “classic time lag of the wholesale channel rebound in watches” and ‘a “revival of fine jewelry”. In its note on Monday, which predicts a “greater probability of continuing the positive surprises in the next 12 to 24 months”, Solca returned to “our recent downgrade too impatient to [Richemont], ”And“ corrected ”it.
In Kering’s terms, Bernstein says he’s “potentially materially better [that the likes of Burberry and Swatch] in terms of underlying quality, [but] the questions focus on Gucci’s momentum beyond the centennial opportunity. Meanwhile, “the jury is out on Burberry’s continued momentum – we see both an opportunity and a risk.” Elsewhere in the market, Solca says Prada – which reported € 2.42 billion ($ 2.9 billion) in revenue for 2020 (down 24% year-over-year, but only 8% for the second half of the year) – “Worked very well” and seems “on the road to recovery”.
Regarding larger-scale market trends, Bernstein says, “consumers will be eager to come back, including in physical stores; brands may moderate the growth of their inventory commitments as their exposure to the gray market is reduced; and the tech sector (to which Farfetch seems more geared than luxury itself) could experience further unfavorable rotation. ”