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PPR Stands Pat on Puma Offer

PPR plans to stand by its original offer for the remaining publicly traded shares of Puma and not sweeten the deal, the company said Thursday.

NUREMBERG, Germany — PPR plans to stand by its original offer for the remaining publicly traded shares of Puma and not sweeten the deal, the company said Thursday.

“This is a good price. It’s a full price and it’s my final price,” said François-Henri Pinault, chairman and chief executive officer of PPR, after a news conference in this southern German city. He was referring to the offer of 330 euros, or $443.19 at current exchange, per share that PPR made to remaining shareholders after the French conglomerate bought 27.1 percent of Puma from a German private equity firm.

“One month ago, [Puma’s] share price was 260 euros, so 330 euros is a good price,” Pinault said. “It’s up to shareholders to decide. I am more than happy to buy more shares, but I am also happy to stay with 27 percent.”

Some analysts have said a share price of 330 euros is too low for Puma, whose stock spiked sharply over speculation of a deal and has continued to rise since the PPR pact was revealed Tuesday. They believe the offer will have to be sweetened to prevent a counteroffer from other companies.

But Puma’s chairman and ceo Jochen Zeitz said that, although he would consider other offers, he considered it unlikely other companies would step forward. “That’s the market’s view and not just my personal view,” he said.

Puma wants to benefit from PPR’s retail experience, logistics know-how and international infrastructure, Zeitz said. “From our point of view, we are still underdeveloped when it comes to merchandising luxury goods in department stores,” he explained. “Cooperation with PPR will certainly help with this.”

PPR has given assurances Puma would remain autonomous, keep its individual identity, retain its German base in Herzogenaurach and not shed staff. “We look at the cooperation as a pool of resources that we can tap into. We would be stupid not to take it up,” said Zeitz.

He declined comment on whether the Puma brand would move more upmarket; however, he denied Puma would turn into a purely luxury fashion brand.

“I actually see this as an opportunity to strengthen our sports side,” he said. “Because getting access to know-how about the luxury and fashion side of the business will allow us to focus on our sports products.

This story first appeared in the April 13, 2007 issue of WWD.  Subscribe Today.

“We are just as comfortable raising the [soccer] World Cup in Italy, as on the catwalk in Paris,” he continued, adding Puma’s official aim is to become the “most desirable sport-lifestyle company in the world.”

PPR, which owns a number of luxury labels, including Yves Saint Laurent, Balenciaga, Stella McCartney and Alexander McQueen, also owns chain stores such as Fnac and Conforama. In total, 43 percent of its income is generated by luxury brands.

“Our vision is to become partners with the most iconic brands in the world,” Pinault said. “That will boost our margins and our international profile. Puma fits our profile perfectly.”

The German sportswear label has seen remarkable growth over the last few years, with shares increasing 500 percent in value since 2003. Since Zeitz took over in 1993, he has managed to transform the company from a manufacturer of cheap sneakers to a hip lifestyle brand with an average yearly growth of 25 percent.

Various analysts’ reports on Wednesday and Thursday applauded the PPR bid for Puma, but raised some concerns over whether a counterbid would appear, Puma’s short-term earnings outlook, particularly in the U.S., and the impact of the acquisition on PPR’s balance sheet. If completed, the Puma acquisition would cost PPR more than $7 billion and, according to Merrill Lynch, increase net debt of EBIDTA to 3.5 times at the end of fiscal 2007.