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Burberry Exiting Inter Parfums License

The buyout price is 181 million euros, or $222.6 million at current exchange, exclusive of receivables, inventories and other tangible assets.

PARIS — Inter Parfums SA stock tumbled 6.1 percent Tuesday, following news that Burberry had exercised its option to buy out the license rights for its fragrance and beauty products — effective Dec. 31 — while discussions between the two companies remain ongoing.


The buyout price is 181 million euros, or $222.6 million at current exchange, exclusive of receivables, inventories and other tangible assets.

Burberry’s fragrance business generates approximately 50 percent of Inter Parfums’ net sales, and makes about 2 percent of the U.K. fashion brand’s revenues and 5 to 7 percent of its earnings before interest and taxes, according to a research note from Citi, which maintained Burberry’s neutral rating.

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“We argue that Burberry management wants to bring its fragrance business to another level in terms of size (by narrowing the gap with fashion brands like Dior, Armani [and] Chanel, which have sizable cosmetics [businesses]), product range (development of skin care, makeup), profitability and brand control,” the Citi note said.

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“Our view would be that discussions remain very much ongoing between Burberry and Inter Parfums, and so we’ll wait and see what the final outcome is,” said Bethany Hocking, retail analyst at Investec Securities. “Clearly, Burberry is fully evaluating every outcome, and that is positive as a buyer of the stock.”


For its part, the fashion company stated, “To maintain flexibility in pursuing its objective to develop fully this business in the future, Burberry has served notice of its intention to terminate the license agreement with effect from Dec. 31, 2012.”

Burberry and Inter Parfums SA, the French subsidiary of Inter Parfums Inc., have been in talks since December 2011 about establishing a new operating structure for the Burberry beauty business. Burberry had until July 31 to determine whether it wished to buy out the unexpired portion of the license or continue the existing license, which runs through Dec. 31, 2017.

Meanwhile, the firms’ dialogue continues.

“Discussions longer and more complex than expected have naturally led Burberry to exercise its option to buy out the license agreement before the July 31 deadline to ensure its ability to benefit from all possible alternatives,” stated Philippe Benacin, chairman and chief executive officer of Inter Parfums SA. “On our side, we have largely anticipated the consequences of this partnership being extended or not.”

Inter Parfums acquired the Burberry fragrance license in 1993. Its most recent major introduction to the franchise was the Burberry Body scent line, which came out on Sept. 1, 2011. At launch, industry sources estimated the fragrance would generate first-year wholesale revenues worldwide of 80 million euros, or $98.2 million.

In July 2010, the Burberry Beauty makeup line was introduced in 30 doors globally and since then, the distribution has been expanded, although it still remains tight.

Inter Parfums SA registered 2011 sales of 398.3 million euros, or $554.7 million at average exchange, up 30.3 percent year-on-year. Burberry’s revenues grew 20 percent to 221.7 million euros, or $308.7 million, thanks to Burberry Body’s launch and the staying power of the brand’s historic lines. Inter Parfums’ stable of fragrance labels also includes Montblanc, Jimmy Choo, Lanvin, Paul Smith and Boucheron.

Other potential partners for the Burberry fragrance and beauty license could include Procter & Gamble, L’Oréal, Puig and Shiseido’s Beauté Prestige International, whose Jean Paul Gaultier license is expected to end in mid-2016 now that Puig has acquired the fashion brand.

Inter Parfums SA shares closed in Paris at 17.75 euros, or $21.89 at current exchange, while Burberry stock ended down 0.9 percent to 1.20 pounds, or $1.88, in London.