MILAN — The waiting game continues on the Tom and Dom front.
Gucci Group president and chief executive Domenico De Sole had said he and creative director Tom Ford would “probably” reach a decision about the renewal of their employment contracts with French group Pinault-Printemps-Redoute by Saturday, but there was no sign of an imminent announcement at press time Thursday.
Spokesmen for Gucci Group and PPR, which owns 67.6 percent of Gucci Group, said negotiations are ongoing, but declined to comment on the progress or the chance of a swift resolution.
Ford is in Los Angeles this week shooting the Gucci spring advertising campaign. De Sole, who had been traveling in the U.S. earlier in the week, arrived back at Gucci headquarters in London late Wednesday
Sources close to the negotiations confirm that corporate governance remains the most contentious issue. But compensation and the way the company is organized are also said to be subjects on the table.
Meanwhile, some in the market are wondering whether it’s in De Sole’s and Ford’s interest to stall a decision on the contracts for as long as possible. Doing so would give the pair more time to produce strong financial results and induce minority shareholders not to tender their shares next year, when PPR is obligated to launch a bid for all outstanding Gucci shares. If that were to happen, Gucci might stay a listed company and avoid becoming a wholly owned subsidiary of PPR.
Claire Kent, luxury analyst at Morgan Stanley, said in a recent report that the real question is the intrinsic value of the Italian company and whether “Gucci management [can] regain credibility fast enough to remain a public company.”
Gucci shares rallied last month, when the company issued bullish forecasts and predicted a rebound in the second half of the year. The shares have lost a bit of ground since then and currently trade at about $86 a share in Amsterdam and New York. That price is above the $85.52 put price PPR must offer next year. On Thursday, Gucci shares declined 14 cents, or 0.2 percent, to close at $86.10 on the New York Stock Exchange.
To be sure, PPR would face a delicate situation should talks fail and Ford and De Sole exit. Notwithstanding any negative reaction from investors, the French group would have to move swiftly to come up with a plan B.It is understood that PPR executives have reflected on its options for a Gucci Group without Ford and De Sole, but have not yet contacted any designers or managers so as not to upset the negotiations.
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