By and  on April 11, 2007

PARIS — PPR thinks luxury goods and sneakers make a perfect match, and it's about to spend more than $7 billion to prove it.

The French conglomerate that owns Gucci Group on Tuesday said it purchased a controlling stake in Puma AG and that it would make a "friendly" offer to buy out the rest of the German activewear firm's shares.

PPR said it paid 1.4 billion euros, or $1.87 billion at current exchange, to Mayfair, the private equity firm of German billionaires Gunter and Daniela Herz, to gain a 27.1 percent share of Puma. The price was equal to 330 euros, or $440.55, a share and PPR said it would offer the same amount for the rest of Puma's publicly traded shares in a deal that values the German firm at 5.3 billion euros, or $7.07 billion.

"This is a favorable moment for the convergence of sport and fashion," said François-Henri Pinault, chairman and chief executive officer of PPR.

The goal is to make Puma the "world leader" among sport lifestyle brands, added Pinault, even though PPR is entering a sector rife with stiff competition from the likes of Nike and Adidas. Consolidation also has changed the landscape of the industry recently, with Adidas, Puma's archrival from its hometown of Herzogenaurach, Germany, having purchased American giant Reebok a year ago.

Pinault said the transaction comes as more consumers "mix and match" luxury items with less expensive pieces, making Puma a "perfect match" with PPR's other brands, from Yves Saint Laurent and Balenciaga to Stella McCartney (who has a tie-up with Adidas) and Alexander McQueen, with whom Puma has collaborated in the past.

Pinault said PPR would "capitalize" on growth opportunities for Puma by opening more directly owned stores, which today only account for 15 percent of Puma's sales. Puma recently has rolled out concept stores in New York; London; Hanover, Germany, and Tokyo, where it can spotlight exclusive collaborations, including 96hours by Neil Barrett and Puma by MiharaYasuhiro.

And there would be more to come, Pinault said, adding the U.S. would be a priority and that Puma needed to "consolidate its presence" in the North American market.

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