PARIS — Ever since Kering revealed last year that it was back in the market for acquisitions, speculation has been swirling over potential takeover targets, but chairman and chief executive officer François-Henri Pinault on Wednesday ruled out a takeover of Moncler.
Speaking after the French fashion house reported better-than-expected fourth-quarter results, Pinault said he maintained regular contact with Moncler chairman, ceo and shareholder Remo Ruffini, but clarified the conversations were linked to the Fashion Pact, the industry-wide environmental initiative spearheaded by Kering.
“There is nothing on the table. We know each other, we appreciate each other,” Pinault said.
Ruffini said at the time that he held regular talks with investors and other sector participants, including Kering, to explore strategic potential opportunities for Moncler. “At the moment, there is not any concrete hypothesis under consideration,” he added.
While rival LVMH Moët Hennessy Louis Vuitton closed last year with the $16.2 billion acquisition of Tiffany & Co., the sector’s biggest deal ever, Kering has frustrated investors who would like it to be less reliant on its cash cow brand Gucci, which accounted for 60 percent of the group’s revenues and 82 percent of profits last year.
Pinault disputed that rationale. “I have no balancing issue,” he said, arguing that Gucci’s presence created a virtuous circle for the group’s other brands.
Though Kering plans to focus on organically growing its existing houses, which include Saint Laurent, Balenciaga and Bottega Veneta, Pinault said it remains in the market for acquisitions, although he ruled out direct competitors, companies below a certain size, and watchmakers.
“I don’t want any brand competing directly with my existing brands. I would be destroying value in doing so. In terms of product category, price segment on the market or style, we are always assessing the opportunities that could come on the market based on that. We’re not passive but we’re still very, very selective,” he said.
Confirming for the first time that Kering dropped out of the bidding for Versace in 2018 because the $2.1 billion price tag was too high, Pinault said he had not been priced out of a deal since. “We haven’t been confronted with a situation where we were interested and we lost out on buying a brand because of the price,” he said.
With a free cash flow of 1.52 billion euros, after settling its Gucci tax dispute with Italian authorities, and its remaining stake in German sporting goods firm Puma, Kering has the means to pursue midsized acquisitions, said Piral Dadhania, analyst at RBC Capital Markets.
“Alternatively, management have also suggested they are open to elevated cash returns to shareholders,” he added.