The biggest-ever public offering in US fashion, the world’s biggest jeweller by market capitalisation, its all in a week’s work in 2011’s electric financial climate.
What a year 2011 proved to be for mergers and acquisitions in the luxury industry. Prada, Salvatore Ferragamo and – just this month – Michael Kors and Chow Tai Fook all went public, with the Kors launch thought to be the biggest-ever public offering in US fashion.
LVMH bought competitors and suppliers alike, the most newsworthy, its €4.3 billion acquisition of Bulgari and its stealthily acquired 21.4 percent stake in Hermès. PPR bought Brioni, Valentino Fashion Group bought Proenza Schouler, and Labelux added Jimmy Choo and Belstaff to its emerging stable of fashion brands.
Burberry and Coach were just some of the luxury goods manufacturers to buy back distribution from partners in Asian countries, whilst eighty-eight-year-old Pierre Cardin put his namesake brand up on the market for €1 billion.
LVMH Group and Groupe Arnault, launched L Capital in India and China. Its fourth private equity fund was reportedly worth $640 million, investing this year in Charles & Keith and Genesis Distribution, alongside negotiations with Gitanjali Gems.
New centres of wealth and prosperity – namely China and the UAE – began to invest in European luxury firms. Majority shareholdings in both Robert Clergerie and Belgian leather goods manufacturer, Delvaux, were acquired by subsidiaries of Fung Capital, following its 2010’s acquisition of Cerruti 1881.
Italy’s Gianfranco Ferrè was acquired by Dubai’s Paris Group, France’s Le Tanneur & Cie was snapped by Qatar Luxury Group, as discussions continue for Chinese ownership of Sweden’s Saab. Finally French – but bankrupted – Jean-Charles de Castelbajac, was sold to a South Korean sportswear group and former licensee, EXR.
Launch: Michael Kors, IPO
Michael Kors Holdings Ltd launched its IPO on the Hong Kong Stock exchange, raising $944 million and valuing the company at $3.8 billion, making it the biggest-ever public offering in US fashion, according to the Financial Times. Michael Kors Holdings set the stock price at $20, and was 10 times oversubscribed just before launch, according to WWD.
Its biggest shareholder is investment firm Sportswear Holdings Ltd, which will cut its stake to 37.7 percent from 51.9 percent after the offering. Sportswear Holdings is led by Silas Chou and Lawrence Stroll, who have previously had a hand in developing other lifestyle brands including Tommy Hilfiger and Pepe Jeans. Founder and chief creative officer Michael Kors, is said to have sold 5.8 million shares, valued at approximately $116 million.
Vertical Acquisition: Morgans Hotel Group, Light Group
Morgans Hotel Group has brought F&B capabilities in-house with the acquisition of the Light Group (TLG), which currently operates numerous venues for MGM Resorts International. As part of the transaction, Andrew Sasson, founder and chairman of TLG, will join the company’s board of directors.
The Light Group currently operate venues such as the Bank Nightclub, Haze at ARIA, and Yellowtail Japanese Restaurant & Lounge at Bellagio Hotel. The firm has already begun to execute a revitalization of the F&B and nightlife operations at Morgan’s Delano South Beach.
Speculation: Ferretti Group, Shandong Heavy Industry Group
Lenders to luxury yachtmaker Ferretti SpA, have allegedly agreed to sell the company to Shandong Heavy Industry Group Co., for €220 million, after writing down approximately €465 million worth of debt. The maker of Riva yachts ceded control to lenders in 2009 when it missed a loan payment on debt used to finance its leveraged buyout.
The yachtmaker will get a new 116 million-euro loan from Industrial & Commercial Bank of China and an 80 million-euro credit line as part of the deal with Shandong Heavy Industry, said the people. Ferretti will also get 100 million euros of new equity from the Chinese company, including 25 million euros underwritten by RBS and Strategic Value Partners.
Clos Dady, a winery located in the Sauternes appellation, has just been purchased by a Russian businessman trained as a physicist. Moscow based Ilkham Ragimov paid 1.5 million euros for this 9-hectare vineyard, with plans to undertake improvements to the estate.
Among the few estates purchased by Russians in the Gironde region, one can cite Château Livran in northern Médoc, purchased in 2008 by Alexey Shkrapkin, and Château La Favière, in the hands of the Zingerenkos.
Speculation: Graff Diamonds, IPO
London-based high-end jeweller Graff Diamonds has hired four banks to lead a $1 billion initial public offering in Hong Kong in the first half of 2012, to raise funds for expansion and benefit from booming demand for luxury products in China.
Graff’s founder told Reuters last month the offering would help the company raise funds to boost its inventory of precious stones and better compete with publicly traded luxury goods and jewellery rivals such as Richemont, LVMH and Tiffany’s.
Created: Holding Company, Hermès
The family owners of Hermes have finalised the creation of a holding company with 50.2 percent of the share capital, to protect the luxury house from hostile takeover. The creation of the holding – dubbed H51 – has been in the works since LVMH revealed this year that it had secretly built up a 17 percent stake in Hermes.
“The creation of this holding structure confirms the unity of the family in their commitment to defend the independence of Hermes to preserve its values and culture,” the family wrote in a press release. The statement also said that the holding H51 had negotiated a priority right to buy a further 12.3 percent of Hermes shares in the eventuality that some family members wanted to sell.
Launch: Chow Tai Fook, IPO
Chow Tai Fook Jewellery Group Ltd became the world’s biggest jeweller by market capitalisation when it raised HK$15.8bn (US$2bn) from the sale of a 10.5 per cent stake. The launch valued the group at approximately $19 billion – more than twice that of Tiffany & Co – and was Hong Kong’s third largest IPO this year.
The Financial Times reports it was less than the company had hoped to raise, as pricing was at the low end of the indicative range, like all of the companies braving the gloomy market in the final weeks of the year. But the IPO was said to raise capital it badly needs for future expansion and will be used to buy gold and diamonds and expand its jewellery store network in Hong Kong, Macau and Mainland China.
For Sale: Groupe du Louvre
Earlier this year, Starwood announced that it is looking for a buyer for its Groupe du Louvre unit’s luxury hotels business, which is likely to be worth close to €1bn. The subsidiary of Starwood Capital has most recently rolled over a €368m loan on the French luxury hotel portfolio provided by German real estate financier Aareal Bank.
The portfolio consists of the listed buildings of 5-star Hôtel du Louvre and 4-star Hôtel Concorde La Fayette in Paris, the 5-star Hôtel Martinez in Cannes and the 5-star Hôtel Palais de la Méditerranée in Nice. They are managed by hotel group Concorde Hotels & Resorts.
Sold: Carlton InterContinental Cannes, Ghanim Bin Saad Al Saad
Less than 8 months after being acquired by Lebanese businessman Toufic Aboukhater, the Carlton InterContinental Cannes has been sold for €450m to Qatar-based investor Ghanim Bin Saad Al Saad.
If confirmed, the sale price, cited in media reports, will be significantly below the €634m that Morgan Stanley paid for the Carlton in 2006, AFP reported. The Qatar investor is also interested in other properties of the Intercontinental chain including those in Vienna, Frankfurt, Budapest, Rome, Amsterdam and Madrid.
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