MILAN — “To be an aggregator has never excited me,” said Remo Ruffini, chairman and chief executive officer of Moncler SpA. “I would rather create uniqueness beyond the market logics, and create strong synergies.”
In an interview with WWD, Ruffini shied away from the idea that he was setting up a fashion group following the revelation earlier on Monday that Moncler was taking over Sportswear Company SpA, owner of the Stone Island brand, in a deal valued at 1.15 billion euros. “Just as I never excluded anything last year [when speculation swirled that Kering was eyeing the acquisition of Moncler], I don’t see a pole [in the future]; I want to create value for the brand,” he said.
Ruffini spoke about a personal relationship with Carlo Rivetti, chairman and ceo of Stone Island, after his son Romeo pointed out that hearing Rivetti speak was like listening to his own father, with “the same vision and obsession for quality.” The acquisition reflects the “union of two families and this is the only target that I have always liked and the Rivettis will reinvest in my holding.”
Indeed, speculation about Ruffini’s interest in Stone Island emerged periodically over the past months, and he admitted working on the deal for about a year, although it was slowed down by the coronavirus pandemic.
Ruffini took the time to underscore that the deal is more than just an acquisition — it’s a step toward “shaping a new world of luxury, beyond luxury and beyond fashion.”
Together, Moncler and Stone Island are “stronger and in a new, unique positioning, outside of traditional luxury, in an area between Hermès and Nike. It’s a new luxury, we must be part of it, with new energy — just as the one we felt when we started Genius.”
Ruffini cited Gucci’s turnaround with Alessandro Michele, attracting younger customers; Louis Vuitton with Virgil Abloh, and Kim Jones at Dior as examples of this seismic change. “Moncler, together with Stone Island, will offer to new generations a new concept of luxury, far from the traditional stereotypes in which young people no longer recognize themselves. We believe in an open and engaged universe, which thrives on community, experiences and cultural exchanges, where communication is always interaction and where the aspirational goes beyond possession to become being part of and belonging,” he said.
The deal opens “a new chapter” for Moncler and Stone Island, he continued. “I always believed luxury is not what you wear, it’s a language, belonging to a community, it’s an experience, and luxury should open its doors,” he said, citing cross-pollination with other industries such as music. “If music can move to Spotify, why should fashion remain the same? Luxury needs to change.”
Analysts agreed with Ruffini, and so did the market, as Moncler’s shares on Monday climbed as high as 5 percent to then settle and close up 1.85 percent at 44 euros.
Swetha Ramachandran, investment manager, luxury brands equities at GAM Investments, said the deal allows Moncler to extend its lead into the world of luxury streetwear and will in time “further ‘de-seasonalize’ the enlarged entity to a greater extent with Stone Island being a year-round purchase,” as well as increasing its exposure to men’s ready-to-wear, which is growing at a faster pace than women’s.
The acquisition “prepares Moncler for its next leg of growth even as it pursues organic brand expansion. I’ve believed that instead of being a deal target, Moncler’s ceo Remo Ruffini wants to create a version of an Italian luxury conglomerate but in a modern vein, with brands that resonate more with a younger, and Asian-led consumer. This could well be the start of this shift,” continued Ramachandran. “Stone Island’s appeal to Moncler is its presence in the fast-growing luxury streetwear market,” citing previous examples of the same strategy: VF Corp. buying Supreme last month and Farfetch buying New Guards Group in 2019.
Equita Sim analysts believe the operation is “strategically opportune” since it allows Moncler to “accompany Stone Island in a geographic expansion,” since the brand relies mainly on business in Europe, which accounts for 80 percent of sales. Moncler will also be able to strengthen Stone Island’s direct distribution. Wholesale accounts for 78 percent of revenues. Equita praised Stone Island’s “strong and distinctive positioning” which can be leveraged to expand digitally. It also estimated Moncler’s liquidity to amount to 883 million euros by the end of 2020, and a positive impact on profits from the operation in the medium-high, single digit range.
Kepler Cheuvreux believes the Stone Island brand is a “good addition” to Moncler in terms of positioning and that it “shows significant potential both in terms of geographic diversification and in retail integration.”
As reported, the agreement was signed between Moncler and Rivetex Srl, a company referable to Carlo Rivetti, owner of a stake equal to 50.1 percent of Sportswear Company’s capital and other shareholders of SPW, referable to the Rivetti family, owners of a stake equal to 19.9 percent of SPW’s capital.
The agreement values Stone Island at 1.15 billion euros, corresponding to a multiple of 16.6 times 2020 earnings before interest, taxes, depreciation and amortization and a multiple of 13.5 times the estimated 2021 EBITDA.
The consideration for the purchase of the shares will be paid in cash by Moncler.
Carlo Rivetti and his family will subscribe for an amount equal to 50 percent of the consideration, or 10.7 million new Moncler shares, at a set price of 37.51 euros a share, which corresponds to the average price of shares in the last three months.
Moncler then aims to acquire the entire share capital of Stone Island, buying the further 30 percent held by Singapore’s state investor Temasek Holdings Private Ltd.
Temasek will also be given the choice of taking newly issued Moncler shares for up to 50 percent of the cash consideration.
If Temasek decides to be paid in cash only, Moncler will pay 748 million euros. Otherwise, Temasek may subscribe up to a maximum of 4.6 million newly issued shares of Moncler, at the same price per share of 37.51 euros.
Temasek owns shares in SPW and Moncler, both directly and through Ruffini Partecipazioni.
The deal is expected to close by the first half of 2021.
At the same time, Rivetti and the other SPW shareholders have reached an agreement with Ruffini Partecipazioni Holding Srl, wholly owned by Remo Ruffini, whereby all newly issued Moncler shares received by them will be transferred to Ruffini Partecipazioni Srl, which owns a 22.5 percent stake in Moncler, with the goal to contribute to the integration between the two companies.
It is also expected that Rivetti, following the closing of the transaction, will join the board of Moncler.
Ruffini will continue to exercise control over Ruffini Partecipazioni, which is expected to change its name to Double R Srl.
Ruffini praised the management of Stone Island, and the “purity” of the brand, saying that each label will remain totally independent and unique. He underscored Stone Island’s appeal to its 1.7 million Instagram followers. “I really respect what [Rivetti] has done in 10 years, its unique positioning, I don’t see any competitor, and I think Stone Island is perfect for Moncler. I love the brand, and we share common roots, the same obsession for purity and innovation. Stone Island reminds me of Moncler 10 years ago.”
While shying away from “creating dreams,” he can see a similar growth path for Stone Island, he mused.
In a conference call with analysts and reporters on Monday morning, Ruffini said of Moncler that “the first important day was in 2003 when we acquired the brand, followed by 2013, with the initial public offer. I did not want to wait until 2023 for another historic moment because time goes by fast, so we did it in 2020.
“Why not now, we don’t have to wait for the crisis to be over, we must fight, everything is speeding up,” he said, adding that he wants to be ready for when the pandemic will be over.
“This is a good message for Italy. We join two Italian brands together, despite the many uncertainties of this moment, I hope it can also be read as an expression of Italian resilience,” said Ruffini.
Rivetti said that he had been contacted by a lot of private equity funds, declining to sell for years but that he agreed to Ruffini’s proposal because he was presented with an industrial project.
Men’s wear brand Stone Island was established in 1982, and it is known for its extensive research on fibers and textiles, experimenting with dyes and treatments.
In the November 2019 to October 2020 period, Stone Island recorded revenues of 240 million euros, edging up 1 percent compared to 237 million euros in the previous year.
In 2020, Stone Island generated 28 percent of revenues in the domestic market, 52 percent in the rest of Europe and 20 percent in the rest of the world. The wholesale channel accounted for 78 percent of revenues while the remaining 22 percent was generated by the online channel and by a network of 24 directly managed stores.
Rivetti said the company’s headquarter in Ravarino “will remain the beating heart of the brand and a center of excellence that will be further enhanced and my team and I will continue, in our current roles, to do what we have been doing with great passion for many years. This is a partnership that represents a great opportunity for the continued development of both companies and which will help Stone Island accelerate its international growth thanks to Moncler’s experience in both the physical and digital retail world.”
Ruffini admitted Stone Island’s product offer was “more balanced” and diversified than Moncler’s with spring/summer and fall/winter accounting for half of sales each, for example.
Chief marketing and operating officer Roberto Eggs said during the call that one of the goals of the acquisition is to help Stone Island have “more direct to consumer control and more presence in retail.” He sees “strong potential in malls and department stores,” and said that, while Stone Island has strong wholesale distribution in Europe, Moncler will be able to help the brand penetrate the Asian market, where its presence is still “low.” He also pointed to potential in North America, given the success of Stone Island’s past partnerships with Nike and Supreme. He praised Stone Island’s “very high level” of full-price sales, “above industry average. Their business model is working.”
Asked by an analyst if he saw an expansion into women’s wear for Stone Island, Ruffini demurred, saying it was too early to discuss strategies, but that he did not envision that specific development for the brand.
Chief corporate and supply officer Luciano Santel said Stone Island will have more direct control of the market, and that marketing investments will increase, also raising the visibility of the brand.