MIAMI — François-Henri Pinault, chairman of the Artemis Group, doesn’t think he overpaid for Gucci Group — even at $9 billion.
During a question-and-answer session at last week’s WWD Beauty CEO Summit here, Pinault insisted the price was a reasonable one and Artemis didn’t overpay.
“Well, you could say $9 billion, but I would prefer 7.2 billion euros,” Pinault said. “Of course, it’s a very fair price. When you consider the real growth potential of the brands inside the Gucci Group, it’s a really fair price. It’s also very consistent with the industry valuation multiple right now, so yes, I would do it over again.”
Pinault is bullish about Gucci’s prospects, saying that “for the next three to four years, the potential growth of the Gucci Group will be to deliver double-digit growth for [Pinault-Printemps-Redoute, Gucci’s parent], I’m sure of that. There won’t be big acquisitions in the next three to four years. You know, we have the potential to almost double the size of the Gucci Group within the next three to five years — internal growth.”
Earlier this month, Gucci Group NV forecast revenues to grow at a double-digit pace for the next two years combined. In fiscal 2005, revenues are forecast to climb 12.1 percent to 3.22 billion euros, or $3.89 billion, while fiscal 2006 revenues should increase 9.6 percent to 3.54 billion euros, or $4.27 billion.
At these projections, the valuation multiple of Gucci’s sale price, in euros, is about three times revenues. Given current market conditions, valuation multiples in the high-end segment vary from two to three times revenues, according to several analysts.
In a Securities and Exchange Commission filing last month, Gucci told shareholders the independent directors found the offer price “was fair from a financial point of view to the public shareholders as a whole.”
The company said in the filing that “there have been no other firm offers by third parties to acquire Gucci within the last two years with which to compare the offer.”
The independent directors told Gucci’s management they were of “the view that the best measure of Gucci’s value would be based on the continuing operation of Gucci as a going concern.”
That means the book value or the liquidation value is not “a meaningful measure of the fair market value of the shares,” the firm said in the SEC filing, adding there were no appraisal or liquidation value sought in setting the offer price of $85.52 a share, which “is significantly in excess of Gucci’s net book value per share of $47.25 at Jan. 31, 2003,” the company said.