StockBeat: Kering-Moncler Report Propels Luxury Names

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StockBeat: Kering-Moncler Report Propels Luxury Names
Credit: © Reuters.

By Geoffrey Smith -- There’s merger speculation in the air among Europe’s luxury groups Thursday, with shares in Moncler (MI: MONC ) – the Italian maker of high-end puffa jackets – rising nearly 10% after reports that it may be swallowed by Gucci-owner Kering (PA: PRTP ).

Bloomberg reported late on Wednesday that Kering (PA: PRTP ), which also owns brands such as Yves St Laurent, Bottega Veneta and Alexander McQueen, has held preliminary talks about a takeover. Neither company officially confirmed the talks.

The move would, to all intents and purposes, be Kering (PA: PRTP ) patriarch Francois-Henri Pinault’s response to the recent move by his arch-rival Bernard Arnault on iconic U.S. jeweller Tiffany & Co . Arnault’s LVMH (PA: LVMH ) agreed to buy Tiffany (NYSE: TIF ) for $16.2 billion last month.

An approach for Moncler doesn’t quite have the same powerful strategic logic behind it: Tiffany will make LVMH the world leader in ‘hard luxury’, catapulting it above Swiss-based Richemont SA (SIX: CFR ), while Moncler would simply add some extra heft in fashion, an area where Kering (PA: PRTP ) is already strong. The combined annual revenues of Kering-Moncler, at some 18 billion euros, would still be less than one-third of a Tiffany-enhanced LVMH.

At a current price of nearly 11 billion euros ($1.22 billion) and a price-earrnings ratio of over 29, Moncler wouldn’t come cheap, but it is at least growing revenues at well over 10%, and its long-term future would arguably be more secure in a bigger stable such as Kering (PA: PRTP ).

Kering’s share price also rose 1.2% in Paris on Thursday on the news, while two other potential targets in the sector Salvatore Ferragamo (MI: SFER ) and Burberry (LON: BRBY ) were 6.9% and 3.6% higher, respectively.

Elsewhere, markets inched up again, extending their recovery from disappointing news on the trade front earlier in the week, although another batch of weak German factory orders ensured that the DAX underperformed, staying flat on the day. The benchmark Euro Stoxx 600 rose 0.3% to 404.28, while the luxury-heavy CAC 40 rose 0.5%.

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