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PPR in Talks to Buy Chinese Brand

Move would boost the company's presence in the world’s second-largest economy.

PARIS — French retail-to-luxury group PPR is in discussions to buy a Chinese brand to boost its presence in the world’s second-largest economy, chief executive officer François-Henri Pinault was quoted as saying in Monday’s edition of the Hong Kong Economic Times.

This story first appeared in the July 10, 2012 issue of WWD.  Subscribe Today.

A spokesman for PPR in Paris confirmed that Pinault had made the remark in an interview with several Chinese journalists. Pinault said the talks were at an early stage and an acquisition could be announced by yearend, but he did not provide additional details.

PPR plans to shed its retail activities, consisting of mail order division Redcats and books and electronics retailer Fnac, as soon as market conditions permit it to focus on its core luxury and sports and lifestyle divisions. Earlier this year, it completed the purchase of Italian tailor Brioni for an undisclosed sum.

Pinault had hinted at his interest in a Chinese brand during a visit to Beijing in September 2011. He was quoted as telling Bloomberg at the time that PPR would be interested in acquiring a Chinese brand “with its own identity. I’ve never seen such an opportunity yet. There’s no reason why it couldn’t happen,” he told the agency.

The executive noted in February that young demographics in emerging markets underpin strong growth prospects for branded goods. Recalling a visit to Indonesia, for example, he predicted that it “could become a bigger market for luxury than India,” given the right political will in the nation.

Emerging markets accounted for 38 percent of sales in PPR’s luxury division in 2011, and 35 percent of sales in the sports and lifestyle division.

Chinese consumers, including their spending as tourists, now account for more than 20 percent of global luxury sales, according to the most recent study from Bain & Co. and Fondazione Altagamma. Despite a slowdown in the pace of Chinese economic growth, sales of luxury goods there are expected to grow between 18 and 22 percent in 2012, compared with an increase of 6 to 7 percent for the sector overall.

Leading luxury brands are making significant investments to grab a share of that pie by opening hundreds of stores in Mainland China, and investing in everything from new luxury brands to real estate and e-commerce.

Hermès International in 2010 unveiled Shang Xia, a luxury brand created specifically for the Chinese market. Shang Xia has a store in Shanghai and is due to open its second boutique in Paris this fall.

Bernard Arnault, chairman and chief executive officer of LVMH Moët Hennessy Louis Vuitton, has joined forces with Macau billionaire Stanley Ho on L’Avenue Shanghai, a $500 million office and upscale shopping complex due to open this year.

Arnault made the investment through L Real Estate, a division of investment firm Groupe Arnault.

Meanwhile, Mousse Partners, the venture capital firm founded by Chanel Inc. executive Charles Heilbronn, late last year provided seed capital to Chinese e-commerce firm Hui She Shang (The Luxury Club). Heilbronn is a member of the Wertheimer family, which owns Chanel.