Bernard Arnault and Catterton are betting big that global reach will win the day in the investment game.
The luxury titan and the private equity player have agreed to join forces and form L Catterton, which the partners say will be the world’s largest consumer-focused investment firm with more than $12 billion under management.
The deal is subject to certain investor approvals and is expected to close early this year. It will create a giant headquartered in Greenwich, Conn., and London, with more than 120 investment and operating experts in 17 offices across five continents.
Partners at Catterton will have a 60 percent stake in the combined business, with the balance owned jointly by Arnault’s LVMH Moët Hennessy Louis Vuitton and his family holding company Groupe Arnault.
Leading the charge on the ground will be global co-chief executive officers J. Michael Chu and Scott A. Dahnke, the current managing partners at Catterton.
Catterton’s North American and Latin American private equity units will complement LVMH and Groupe Arnault’s European and Asian private equity and real estate operations, L Capital and L Real Estate.
All together that’s a potent combination: intimate knowledge of the global luxury market, a vast Rolodex and piles of money that need to be put to work.
A person familiar with the thinking behind the deal said it was propelled by the drumbeat of globalization and the desire of most businesses to get more than just a financial injection. The expertise and muscle of the combined company could, for instance, help a luxury brand build a global presence in a targeted way without having to saturate any one market.
“Capital is sort of a commodity,” the source said. “Business owners and entrepreneurs want solutions and support that go beyond just the money.”
Arnault, who is chairman and ceo of LVMH and Groupe Arnault — and, according to Forbes, the world’s 13th-richest man — said the deal would bring “together our global network and industry expertise with Catterton’s longstanding operational approach to building value in consumer investments.”
Arnault has an association with Catterton since 1998, when he started investing in the company’s funds.
Dahnke said: “The globalization of media and technology, combined with increasingly permeable geographic borders, is driving rapid consumer growth on an unprecedented global scale. Together, Catterton and L Capital will create a global consumer investing franchise with unmatched access to resources in the industry. We expect this combination to further our mission of investing in high growth opportunities in categories with attractive consumer economics.”
Chu added: “The breadth of our collective expertise will be second to none in the consumer industry, and we look forward to benefiting from the strength and global reach of the team at L Capital and L Real Estate as we continue to seek out investment opportunities with significant growth potential.”
L Capital has operated as a development fund, investing mainly in jewelry chains, affordable luxury, retail and entertainment. It bought the Sandro, Maje and Claudie Pierlot fashion chains in 2010, leveraging its expertise with real estate to expand the French brands and flip them to Kohlberg Kravis Roberts & Co. three years later, with market sources estimating L Capital tripled its investment.
L Capital Real Estate specializes in the luxury sector. Among its high-profile developments are L’Avenue in Shanghai and the Miami Design District, owned by Miami Design District Associates, a partnership between Dacra and L Real Estate.
Catterton invests in all the major consumer segments, including retail and restaurants, consumer products and services, food and beverage, consumer health and media and marketing services. Its investments include Intercos, Pure Barre, the Worth fashion brand, John Hardy, Restoration Hardware, Sweaty Betty, Frédéric Fekkai, Build-A-Bear Workshop, Peloton and more.
According to the company, it has made more than 100 investments in consumer brands since 1989. Catterton says it is the largest consumer-focused private equity group in North America with $5.5 billion in capital “dedicated to growing middle market companies and emerging, high-growth enterprises.” It was cofounded as Catterton-Simon Partners by Chu, Frank Vest and former U.S. Treasury Secretary William Simon and has raised seven private equity funds and two growth equity funds since its inception.