LVMH pays €2bn for key stake in luxury clothier
LUXURY brands group LVMH Moet Hennessy Louis Vuitton has agreed a €2bn deal for a majority stake in an Italian maker of €1,000 cashmere sweaters.
The deal for an 80pc stake in Loro Piana values the Italian family controlled business at €2.7bn, LVMH said in a statement. The family owners will retain a 20pc stake in the business.
"This should be viewed as a positive, opportunistic deal for LVMH," said Thomas Chauvet, a Citigroup analyst in London, who recommends buying the shares.
Loro Piana is LVMH's biggest acquisition since the group bought Bulgari in 2011.
LVMH's Louis Vuitton brand, its biggest, has faced a slowdown as consumers from Barcelona to Beijing seek even more exclusive items.
French-headquartered LVMH's shares were up 1.9pc to €131.15 each on the news yesterday.
The company, which also makes Celine handbags and owns the Sephora chain of makeup stores, has a market value of €66.6bn.
Loro Piana competes in what analyst calls "the absolute luxury" segment.
Investment bank Bain predicts the segment will grow faster than the rest of the industry until at least 2014. Loro Piana gets two-thirds of its revenue from men's and women's clothing and other goods, which it distributes via 130 stores worldwide, and the rest from textiles such as vicuna, a rare wool from a South American mammal, according to LVMH.
In addition to vicuna, which Loro Piana was awarded the exclusive rights to reintroduce to the market in 1994, the company is the biggest "western" producer of cashmere and the largest single purchaser of the extra-fine merino wools in Australia and New Zealand, according to LVMH.
LVMH said it sees "significant growth potential" in retail expansion and widening Loro Piana's product offer, including in leather and accessories.
The Loro Piana family has been trading in wool and textiles since the beginning of the 19th Century.
The transaction will boost earnings the first year after it's concluded, LVMH chief financial officer Jean-Jacques Guiony said. (Bloomberg)