After a year of rampant M&A; activity, a more strategic approach to investment is falling into fashion, championed by industry-savy funds like L Capital
When it comes to investment deals, it’s not difficult to get distracted by the often-dizzying financial sums changing hands. Cash is a much-needed commodity in the modern luxury landscape, the fuel for retail expansion, accompanying inventory, digital development and the necessary communications strategies to ensure the success of all of the above.
But without the assistance of a backing conglomerate or a patient private equity partner, these cash-hungry growth strategies become nigh on impossible. And the pressure is on – it’s not difficult to see that now is a prime time for capitalisation in the luxury industry. Brands are quite literally scrambling to establish physical retail in emerging markets, or invest in sleek yet functional e-Commerce platforms to serve the new global consumer. Much capital is required not only to grow, but also just to keep up.
Therefore it is of little surprise that L Capital Asia, the private equity fund launched only in 2009, has fully deployed its initial $650 million in funding. Though the fund works outside the luxury focus of its parent LVMH – and only takes minority stakes in firms, from which it targets an exit within four to six years – its strategic impact is becoming notable.
“ Without the assistance of a backing conglomerate or a patient private equity partner, these cash-hungry growth strategies become nigh on impossible ”
Speaking with WWD, managing partner Ravi Thakran explained, “Our help is more specific than plain vanilla private equity firms. We can help with how you design a store or a display window, with the uniform of the team and how to handle a cash register because we ourselves are operating players.”
Mr. Thakran goes on to cite the example of Singapore-based retailer Sincere Fine Watches, which the fund has assisted in doubling revenues, tripling EBITA and enhancing both their retail portfolio and physical presence. “They did not have Rolex distribution,” he explains. “So we reached out to Rolex and impressed on them to award rights. Rolex added a lot of value because most men in Asia want a Rolex watch. We’ve also helped them get better locations at places like Starhill [Gallery], Marina Bay Sands and ION Orchard at better rates.”
So whilst a minority stake investment in a Singapore timepiece retailer might not be as appealing to the media as Facebook’s $1 billion acquisition of Instagram, perhaps its time to look beyond the numbers? After a year of rampant M&A; activity in our industry, perhaps a more strategic approach will fall into fashion and ‘wolves in cashmere’ like Bernard Arnault will be seen as more of a blessing than a threat.
Audi and its parent Volkswagen AG, are said to be negotiating the acquisition of Italian motorcycle maker Ducati for approximately €870 million, including debts of around €200 million. Reuters reported that the valuation of a few real estate properties still needed to be sorted out but the deal was not expected to collapse over this issue.
It was also reported in Italian newspaper Corriere della Sera that Daimler was interested in acquiring Ducati, something that a spokesperson for Daimler has since denied.
Facebook has undertaken its largest acquisition to date, purchasing Instagram – the popular photo-sharing application – for a reported $1 billion in cash and stock. In just two years, Instagram has amassed over 30 million users exclusively on the iPhone platform, and last week launched an app compatible with Google’s Android. Both companies expressed their commitment to run Instagram as an independent service.
Louis Vuitton, who purchases its dials for Louis Vuitton timepieces, has acquired Geneva-based watch dial manufacturer Léman Cadran. The acquisition follows that of Swiss watch dial manufacturer ArteCad SA last November and high-end watch workshop La Fabrique du Temps in July 2011.
Coty Inc. has offered to buy Avon Products Inc. for $10 billion, which Avon’s board has rejected. Bart Becht, Coty’s chairman, said he will start talking to Avon’s shareholders in the next two weeks to put pressure on the company’s board to rethink their decision.
The Reimann family – through Vienna-based JAB and its subsidiaries – owns
80 per cent of Coty. The Reimann family also own Labelux Group GmbH, which manages luxury brands Bally, Belstaff and Jimmy Choo.
Gitanjali Gems Ltd has launched a Singapore-based jewellery retail and distribution company, Leading Singapore Jewels, with the mission of expanding its business in the country and throughout the Far East region. Leading Singapore Jewels Pte. Ltd. was incorporated through Aston Luxury Group Ltd., Gitanjali’s Hong Kong-based subsidiary.
Harry Winston Diamond Corp.and groups led by KKR & Co. and Apollo Global Management are said to be in talks to buy BHP Billiton’s Ekati diamond mine in Canada. The sale is expected to fetch up to $750 million and could be completed within the next month. The Ekati project produces about 11 per cent of the world’s diamonds by value, according to BHP’s website.
Fawaz Gruosi, founder of Swiss fine watch and jewellery firm De Grisogono, has relinquished his majority stake to outside investors in a bid to fuel expansion. Mr. Gruosi has sold an undisclosed stake to several European and African private equity funds but remains in place to oversee the firm’s growth.
The Rothschild family is to consolidate its French and British operations. The deal will see Paris Orléans, the Rothschild Group’s holding company, buy the minority stakes in its subsidiaries. The combined firm will also take on a French limited partnership structure to ward off potential takeovers.
Sahara India Pariwar reportedly offered to buy the majority share in New York’s Plaza Hotel from Kingdom Holding Co., which is controlled by Saudi billionaire Prince Alwaleed bin Talal. “Kingdom isn’t planning on selling at this point in time,” a spokesman for the company revealed to Reuters. “The prince’s objective is to be a long-term investor in this kind of iconic asset.”
US-based private equity fund manager, Pegasus Capital Advisors L.P. has entered into a binding agreement to acquire Bangkok-based Six Senses Resorts & Spas for an undisclosed sum. Under the terms of the deal, Pegasus will acquire all of the Six Senses and Evason branded resort and spa management contracts and related intellectual property rights and will operate them under a new company managed by Pegasus and its affiliates.
Source: Six Senses Resorts & Spas
In a filing with the Securities and Exchange Commission, Fisker said it had raised $263 million of a total offering amount of $300 million. In March Fisker changed its CEO and halted work at its U.S. plant to renegotiate the terms of a $529 million loan from the U.S. Department of Energy. The brand was also forced to recall 239 Karmas last December and halt sales in January to address a software malfunction.
Listed jewellery firm Gitanjali Gems is said to have revived talks with L Capital Asia, the private equity arm of the world’s largest luxury group LVMH, for a strategic investment. Negotiations initially began in March 2011, shortly after L Capital’s Asian arm was launched, for a reported $100-125 million.
Source: Economic Times
Brunello Cucinelli SpA is expected to launch its initial public offering on May 3, following the launch of its road show on April 16, when the share price will be determined. Sources say the namesake entrepreneur plans to float about two thirds of the company, which is valued at approximately €500 million euros after a capital increase.
La Montre Hermès SA is said to have entered into negotiations to acquire Swiss watch dial manufacturer and current supplier Natéber SA. This follows the purchase of a 32.5% stake in the Swiss manufacturer of boxes for high-end watches, Joseph Holding Erard, last September.
Source: Fondation de la Haute Horlogerie
British heritage brand Aquascutum has been put up for sale, following a loss of £10 million in the year to February 2010. Aquascutum was family owned until 1990, after which it was purchased by Japanese textile conglomerate Renown Incorporated. After it suffered three years of losses, it off-loaded the company to Harold Tillman in September 2009, who has reportedly consulted Rothschild to handle the sale.
Source: Fashion United
French contemporary brand A.P.C. has sold a 7 per cent stake to French investment firm Audacia for a temporary cash injection to fund its expansion. “The arrangement represents a temporary entry of the investment company to A.P.C. with a pre-established buy back agreement to take place in five years’ time,” the company stated. “The objective of the move is to fund retail growth and increase the debt capacity of the company.”
For more in the series of The Latest Investments, please see our most recent editions as follows:
- The Latest Investments: Bruno Cucinelli, Sonia Rykiel & Net-a-Porter
- The Latest Investments, Lanvin, Luxottica & L Capital Asia
- The Latest Investments: Michael Kors, Chow Tai Fook & Ferretti Group