SFER Salvatore Ferragamo SpA

  By Cristina Roca 
 

Moncler SpA's (MOV.MI) main shareholder and chief executive Remo Ruffini on Thursday threw cold water on reports that the company has held exploratory talks with French luxury-goods conglomerate Kering (KER.FR) over a possible deal.

Mr. Ruffini said he is in contact with sector players, including Kering, to explore potential opportunities. "At the moment, however, there is not any concrete hypothesis under consideration," Mr. Ruffini said, referring to a Bloomberg report late on Wednesday that said the Italian company, known for its luxury puffer jackets, has held early-stage discussions with Kering.

The report got luxury investors buzzing about the possibility of another big M&A deal after LVMH Moet Hennessy Louis Vuitton SE (MC.FR) scooped up Tiffany & Co. (TIF) last month in a mammoth $16.2 billion deal.

At 1315 GMT, shares in Moncler traded 8.2% higher at EUR42.00 ($46.53), while the news also buoyed shares of smaller Italian luxury-goods companies seen by investors as potential M&A targets. Shares in Salvatore Ferragamo SpA (SFER.MI) traded 6.7% higher, and Tod's SpA (TOD.MI) stock was up by 5.1%. Both Italian heritage shoe brands that have struggled to keep up with larger players in recent years.

LVMH's recent Tiffany megadeal has put pressure on other big sector players like Kering to join the M&A dance, Bernstein analyst Luca Solca said.

Kering has had a great run in the past few years. Shares in the luxury group now trade three times higher than four years ago, buoyed by the huge success of Gucci, the main brand in its portfolio. But recently its overreliance on the brand, which brings in 83% of the group's total earnings before interest and tax, according to Equita SIM's estimates, is making investors jittery.

Kering needs M&A to move to the next level, and Moncler could help it balance its portfolio, becoming the group's second-biggest brand by value, Jefferies analyst Flavio Cereda said.

Moncler's best-in-sector margins and leading position in its market niche are attractive, Equita SIM analyst Paola Carboni said.

The company has gone from a small skiwear maker into a runaway success story in luxury under the helm of chief executive Remo Ruffini. He bought a stake in Moncler in 2003 and took the brand upmarket, creating buzz through collaborations with famous designers like Valentino Fashion Group SpA's Pierpaolo Piccioli.

The brand has been enjoying steady double-digit organic sales growth for the past few years, and analysts expect it continue, with a consensus estimate provided by FactSet forecasting 13% organic sales growth for 2019.

However, Bernstein's Luca Solca believes Moncler isn't the perfect target for Kering: Firstly, Moncler does nothing to enhance Kering's hard-luxury credentials at a time when competition in the jewelry category seems to be heating up following the LVMH-Tiffany tie-up.

Secondly, Ruffini's management team has already done a very good job with the brand, meaning it will be harder for Kering to add value--especially if it has to pay a hefty premium to get its hands on the brand, the analyst said.

With shares in Moncler now worth 48% more than at the beginning of this year and a EUR10.89 billion market valuation, any deal to snap it up would be considerable in size. Ms. Carboni believes Moncler could fetch EUR50 euros a share, representing a 30% premium. This would bring the company's valuation close to EUR13 billion.

And given the brand's bright outlook, the French owner of Gucci shouldn't expect to get any discounts. "Ruffini is in no hurry to sell," according to Mr. Solca.

"It is not a cheap deal," Mr. Cereda said.

Kering declined to comment when contacted by Dow Jones Newswires.

Write to Cristina Roca at cristina.roca@dowjones.com; @_cristinaroca

(END) Dow Jones Newswires

December 05, 2019 08:53 ET (13:53 GMT)

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