Ferretti Group said yes, General Motors said no. We take a closer look at recent cross-border mergers and acquisitions in the luxury industry
Recently Forbes begged the question “Will It Really Happen?” in reference to cross-border mergers and acquisitions between China and the United States. The feature went on to outline several reasons why 2011 turned out to be a disappointing year for such acquisitions, and highlight the difficulties of integrating cultures, currencies and expectations in the risky, fast-moving world of M&A.
It was particularly interesting to read this knowing that the luxury industry has faced two of these very deals in the past few months, each with distinctly different outcomes.
Italian Superyacht manufacturer Ferretti Group was sold to the state-owned parent of China’s biggest bulldozer-maker, Shandong Heavy. Conversely, Saab found finance in the form of Chinese firm Youngman Lotus and a Chinese bank, but General Motors blocked the sale. As a result, Saab and its subsidiaries have declared bankruptcy and are in the process liquidation.
One brand lives. One brand dies.
General Motors cited concerns surrounding intellectual property and technology they supply to Saab as the key reasons for blocking sale to the Chinese. They were not ready to share their technology with a region once famous for counterfeit and replication.
Conversely, Ferretti Group chairman Norberto Ferretti believes new Chinese ownership would help his company better reach the global market and “meet growing Chinese demand for luxury goods for the coming five to 10 years.”
Two distinct attitudes and two distinct outcomes.
Only time will demonstrate the effects of Chinese ownership, on a brand that has historically traded on its Italian heritage. But in the meantime it will be interesting to see how other cross-border deals with China progress. The luxury industry has enthusiastically embraced Chinese consumers, but will the same warm welcome be extended Chinese investors?
Capital: Ralph Bartel, Lanvin
Existing Lanvin investor Ralph Bartel is said to have exercised his option to purchase an additional 12.5% stake in Lanvin. Mr. Bartel’s €17.5 million brings his stake to 25% from 12.5%. The capital increase resulted in the issuance of 150,191 new shares.
Joint Venture: Canali, Genesis Luxury Fashion
Luxury jeweller Canali is to launch an Indian joint venture with Genesis Luxury Fashion, where the Italian brand will control 51%. Canali had the option to set up a wholly owned subsidiary, but would mean the brand would have to mandatorily source 30% of its products from Indian SME’s.
Speculation: L Capital Asia, Aurum Group
L Capital Asia is though to have expressed an interest in buying Aurum Group, owner of Watches of Switzerland. Aurum was put up for sale in April 2011 by failed Icelandic bank Landsbanki.
Official: Saab, Bankrupt
Saab, along with its Powertrain and Tools subsidiaries, has officially filed for bankruptcy with a Swedish court. Saab North America has also been put into liquidation. The filing follows General Motors’ decision to block the sale of Saab to Chinese firm Youngman. Saab’s parent company, Swedish Automobile, subsequently decided that the automaker without further funding will be insolvent and that filing bankruptcy is in the best interests of its creditors.
Acquired: Erroca, Luxottica
Italy’s Luxottica has purchased Israeli accessories retailer Erroca for €20 million, following acquisition approval by Israel’s Antitrust Authority. Luxottica will re-launch existing Erroca stores under its own Sunglass Hut brand.
Negotiations: Porsche, Volkswagon
Volkswagen will continue to explore plans for an “an integrated automobile group” with majority shareholder Porsche, after scrapping plans last year for a merger because of legal tangles. The Porsche holding company owns a majority of VW’s common stock. Volkswagen in turn owns 49.9% of Porsche’s auto making business and holds an option to purchase the remaining 50.1% from the holding company.
Official: PPR, Brioni
PPR’s 100% acquisition of Italian tailor Brioni has received clearance from antitrust authorities. The group did not disclose the value of the transaction.
Acquired: DM London, Watch Hut & Watch Gallery
UK independent specialist watch retailer DM London has acquired both The Watch Gallery and The Watch Hut and their respective websites for an undisclosed amount. DM London has predicted annual group turnover for 2012 in excess of £50 million.
Takeover: Qatar National Hotels, Raffles Paris & Singapore
Qatar Nationals Hotels Company has taken ownership of two Raffles properties, both the Raffles Hotel Singapore and Le Royal Monceau, Paris. “Adding these iconic properties to our portfolio represents consistent steps of ONH’s strategic expansion at the international level”, says Hamad Abdulla Al Mulla, CEO of Qatar National Hotels.
Sold: Ferretti Group, Shandong Heavy
Ferretti Group was sold to the state-owned parent of China’s biggest bulldozer-maker. Creditors will sell 75% of Ferretti for €178 million to Shandong Heavy Industry Group-Weichai Group. Royal Bank of Scotland Group Plc and Strategic Value Partners LLC will also own 12.5% stakes in the Italy-based boat maker.
Capital: Xinhe, L Capital Asia
L Capital Asia has announced that it will provide capital to Xinhe Fashion Co Ltd to become its second-largest equity stakeholder. Funding of the Xiamen-based clothes marker is the first mainland investment by the equity fund. The partnership is expected to help Chinese fashion brands go global with higher quality at a faster pace, said Luo Yonghui, general manager of the company.
Official: DeBeers, Anglo American
Anglo American’s proposed acquisition of an incremental interest in diamond giant De Beers has been passed by the requisite majority at a General Meeting. This takes Anglo American’s shares in the diamond giant from 45% up to 85%.
Speculation: Valentino, Puig
French daily newspaper L’Expansion has reported that Puig is in talks with Permira to acquire a majority stake of 70% in Italian fashion house Valentino. The move comes less than one year since Puig acquired the licence for Valentino fragrances from P&G.
Bought: Chateau Réaut, Yannick Evenou
Yannick Evenou, managing director of Chateau La Dominique, Chateau Fayat and Chateau Clement-Pichon, has bought a Cotes de Bordeaux estate from Champagne Roederer , as part of a 12-strong consortium. 400 members of the public have also taken shares in the property. The scheme had used social networking site Facebook to attract potential investors.
Stalled: DLF, Amanresorts International
The sale of Amanresorts by Indian developer DLF is said to have stalled due to lower-than-expected bids by shortlisted companies. Shortlisted bidders are said to have put in bids of $300- $315 million, while DLF expects to sell for at least $400 million. China’s HNA Group, India’s Sahara Group and Qatar Investment Authority are all thought to have placed bids on the resort portfolio.
Majority Share: Soho House, Yucaipa Companies
A majority share of The Soho House Group has been sold to billionaire investor Ron Burkle, who has also joined as chairman. Founder Nick Jones will remain chief executive and current majority owner, Richard Caring, will still hold approximately 30%. Terms of the deal were not officially disclosed, though it is believed that Mr. Burkle purchased a 60% stake for £250 million.
Sold: Nicole Farhi, Kelso Place Asset Management
Private equity group – and former Smythson owner – Kelso Place Asset Management has acquired a majority stake in Nicole Fahri, from OpenGate Capital. Nicole Farhi will remain creative director and Niki Scordi as chief executive as the brand undertakes ‘significant expansion’ particularly in the Asian region.
Farfetch.com has raised a new $18 million round of funding from Index Ventures, eVenture Capital Partners and existing investors Advent Venture Partners., in a bid to capitalise on the burgeoning US and Brazilian markets. The valuation of the company in this latest round was not disclosed.
Speculation: L Capital Asia, Fabindia
L Capital Asia is said to be in discussions with Fabindia, to acquire a minority stake in the retailer. Fabindia is one of India’s most profitable retail companies and has been looking to raise capital to fund its expansion and existing operations, and buyout existing investor, Wolfensohn Capital Partners, which is keen on exiting.
Speculation: Lejaby, Private Consortium
French lingerie brand Lejaby is to be taken over by a consortium of former La Perla chief executive officer Alain Prost, Tunisian lingerie manufacturer Isalys and Christian Bugnon, the son of a former CEO of Lejaby. The takeover will involve the closure of its manufacturing facility in Yssingeaux, the company’s last in France, and 93 layoffs there. The new owner will maintain 194 staff at the company’s headquarters, of a total 250.
Speculation: Koidu Diamond Mine, Hong Kong
Privately held natural resources company, Beny Steinmetz Group, is thought to be considering an IPO for Sierra Leone’s biggest diamond mine, Koidu, on the Hong Kong stock exchange in late 2012. A BSG spinoff called Octea, the new holding company for Koidu, will aim to raise $400m-$600m and achieve a valuation of $2bn-$3bn.