December 5, 2019 / 1:35 PM / 8 months ago

Moncler plays down possible Kering tie-up amid luxury merger wave

PARIS/MILAN (Reuters) - The chief executive and top shareholder of puffer jacket maker Moncler (MONC.MI) played down speculation around a takeover by Gucci-owner Kering (PRTP.PA) on Thursday, saying the two firms sometimes talked but that there was no deal in the works.

Shares in the Italian label, which has become a luxury industry darling in recent years after a makeover under CEO Remo Ruffini, surged earlier after Bloomberg reported that it had held exploratory discussions with Kering.

That heightened expectations of more dealmaking in a luxury industry dominated by vast conglomerates, although some banking and sector sources said they were sceptical about the merits of a combination for both sides.

Ruffini, who bought Moncler in 2003, said in a statement 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, however, there is not any concrete hypothesis under consideration,” he added.

Moncler’s shares hit record highs in Milan earlier and were up 8.5% after Ruffini’s comments, while Kering shares were up 1.2% in Paris. The company declined to comment.

Now worth over 10 billion euros ($11 billion) on the stock market, Moncler would likely command a hefty premium, several banking sources said, and would not drastically rebalance Kering’s portfolio, which is heavily reliant on clothing labels.

Its larger Paris-based rival LVMH (LVMH.PA), owner of Louis Vuitton, recently raised the stakes by snapping up U.S. jeweller Tiffany (TIF.N), increasing its presence in one of the fastest-growing pockets of the luxury industry.

Still, the speculation around Moncler comes as the outlook for standalone brands becomes trickier, with cash rich groups like LVMH and Kering drowning out competitors with more spending on social media marketing and the hire of star designers.

The conglomerates are also better equipped to absorb the hit from protests in Hong Kong and invest in markets like mainland China, which could motivate some labels to seek buyers.

FASHION MOMENT

Under Ruffini, Moncler - which derives its name from Monestier-de-Clermont, a mountain village near Grenoble in France, and which originally made sleeping bags - has developed a more fashionable edge.

It listed on Milan’s bourse six years ago and has thrived by expanding in markets like Asia, while rejigging its strategy.

It now invites guest designers to dream up more fanciful versions of its puffers, which sell for over $1,000, dresses movies stars in quilted gowns, and holds Instagram-friendly events in its stores.

FILE PHOTO: Models present creations from the Moncler Autumn/Winter 2018 collection during Milan Fashion Week in Milan, Italy February 20, 2018. REUTERS/Tony Gentile/File Photo

Like its rival Canada Goose (GOOS.TO), which makes more functional winter jackets, Moncler has also benefited from growing consumer demand for high-end streetwear.

“This trend is not a fashion moment, people change the way they dress, they want to be more free, more casual,” Ruffini told Reuters in a 2018 interview.

But analysts and industry insiders have sometimes questioned whether its model, which is heavily reliant on a single product, is sustainable.

Ruffini, who owns more than 22% of the group, had talked to Kering about a potential deal around the time of its flotation, two sources familiar with the matter said.

He has given few indications since that he would be willing to sell, however.

KERING ON THE LOOKOUT

Kering, which also owns Saint Laurent and is run by billionaire Francois-Henri Pinault, is meanwhile widely expected to seek out an acquisition to offset its reliance on Italian fashion label Gucci for profits.

But Moncler may not be the perfect fit.

FILE PHOTO: A video installation displayed at the Moncler catwalk show during Milan Fashion Week Spring 2019 in Milan, Italy, September 19, 2018. REUTERS/Stefano Rellandini/File Photo

“Remo 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,” Bernstein analyst Luca Solca said in a note.

Another banking source said Kering might think twice about buying a lifestyle label again after needing years to turnaround sports brand Puma, which it purchased in 2007 and spun off to its shareholders in 2018.

Shares in Burberry (BRBY.L), Salvatore Ferragamo (SFER.MI) and Tod’s (TOD.MI), which are often cited by bankers as potential takeover targets, also rose on Thursday.

($1 = 0.9073 euros)

Reporting by Sarah White in Paris, Pamela Barbaglia in London and Claudia Cristoferi in Milan; Editing by Keith Weir/Jane Merriman/Kirsten Donovan

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