The company is distributing 70 percent of its stake in Puma to shareholders, notably Artémis, which will become a “long-term strategic shareholder” of Puma with a 29 percent stake. Artémis holds a 40.9 percent stake in Kering and Kering will maintain a 16 percent interest in Puma going forward. About 55 percent of Puma’s stock will be free-floating on the stock market.
“[Kering’s] ambition is to continue to grow and develop its powerful ensemble of houses in couture, leather goods, jewelry and watches, leveraging on its high cash-flow generation and strong financial position,” the company said.
It also noted that the brand is “enjoying strong revenue growth momentum and achieving an improvement in its profitability.” During its third quarter, Puma saw sales increase 13 percent to 101.2 million euros.
François-Henri Pinault, Kering’s chief executive officer and chairman, said the distribution is a “significant milestone in the history of the group.”
“Kering dedicating itself entirely to the development of its luxury houses, whose enduring appeal, built on creative audacity and innovativeness, will allow us to continue to gain market share and create value,” Pinault added. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth.”
Jean-Marc Duplaix, Kering’s chief financial officer, echoed that sentiment during a media call, noting, “this all makes sense in light of Kering’s history.”
As for why the company chose not to sell Puma outright, the cfo said it was to avoid a lengthy sale process that could have destabilized the brand, while rewarding shareholders for their patience during the turnaround.
Rogerio Fujimori, and analyst with RBC, agreed with that take in a note, adding that a spin-off “also was a simple and fast way to deal with its non-core stake in Puma, which gives Kering shareholders the option to sell.”
Duplaix expects markets to cheer the move, considering analysts have long urged Kering, which operates Gucci, Saint Laurent and Balenciaga, among others, to shed its relatively underperforming sports division. California brand Volcom, now the last in Kering’s sports and lifestyle unit, is likely the next to go, but when the timing is right, he added.
“Volcom is not destined to remain within the group in the long term,” Duplaix said. “At any rate, nothing has been set in motion in that regard. For that matter, Volcom, like Puma, has done a remarkable job in turning around its business to continue growing on its markets.”
Early last year, HSBC Bank said Kering seemed likely to spin off its stake in Puma, which would free up some cash and could see Kering add another brand to the group. But Duplaix indicated on Thursday that Kering does not expect to resume acquisitions and will focus on organic growth avenues.
In October, speculation of a spin-off increased, but Bjørn Gulden, Puma’s ceo, said “every quarter there is another article or a report saying that Kering’s selling, there’s nothing new.” He added: “I haven’t heard anything about it.”
Puma for its part said on Thursday that it “welcomes the planned proposal” as it will give other investors more of a stake and let the company move forward with its business strategy.
“Puma would become much more attractive for investors as our shares would have a substantially higher free float and larger trading volumes,” Gulden said. “Kering and Artémis, however, would remain strong partners and shareholders, which proves that they believe in our strategy and Puma’s future success.”
Luca Scola, an analyst with Exane BNP Paribas, said in a note that “this is a landmark achievement for Kering and a sign that the luxury goods industry is progressing in its consolidation and rationalization.”
He also said it will “add oomph” to Kering’s stock and that the Kering shareholders are expected to receive about 1 share of Puma for every 12 shares of Kering.
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