LVMH wedges door open for future Moncler deal
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Aimee Donnellan
LONDON, Sept 27 (Reuters Breakingviews) -Bernard Arnault is giving a helping hand to the CEO of Italian rival Moncler MONC.MI – and boosting his own M&A options in the process. The CEO of French luxury giant LVMH LVMH.PA is funding Remo Ruffini’s purchase of extra shares in the $16 billion maker of shiny gilets, according to a statement released late on Thursday. Arnault’s move allows Moncler to fend off any unwanted overtures, but also puts LVMH in pole position to pounce when the time is right.
Ruffini needed a new friend. The CEO’s grip on the Milanese outerwear specialist has weakened in recent years. The vehicle he controls, Double R, now owns less than 16% of Moncler compared with 26% in 2019, after Ruffini’s former partners disentangled themselves from a previous investment arrangement. This decline arguably made the group more vulnerable to a hostile takeover or activist investor.
Luckily for Ruffini, Arnault has come along to the rescue. The LVMH boss agreed to buy a 10% stake in Double R with the option of increasing it to 22%. Ruffini’s vehicle will in turn use the money to up its stake in Moncler to almost 19% over time. That would imply an indirect holding of 4% for LVMH.
Arnault’s timing looks good. Moncler has endured the same difficulties as its luxury rivals over the past two years, including weakness in the key Chinese market. On Thursday, Ruffini’s company was trading at 21 times expected 12-month forward earnings, according to LSEG Datastream figures, compared with a five-year average of over 26. The multiple may pick up if Beijing’s planned stimulus boosts luxury spending.
Under the terms of the deal, LVMH can appoint two board members to Double R and one to Moncler. That will give Arnault a better insight into the Italian company’s goings on. Even better, he’s built up some goodwill with Ruffini. For now, the 62-year-old Moncler boss seems in a stronger position to keep Moncler independent. But if he ever changes his mind, it’s pretty obvious who would get the first phone call.
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CONTEXT NEWS
Moncler said on Sept. 26 that French luxury rival LVMH had bought a 10% stake in Double R, a holding company controlled by the Italian group’s CEO Remo Ruffini.
The investment will allow Ruffini’s Double R vehicle to increase its stake in Moncler to 18.5% over the next 18 months, from 15.8% currently.
LVMH, run by Bernard Arnault, will indirectly fund the purchases by continuing to invest in Double R. The French giant could take its holding up to a maximum level of approximately 22% in Double R, Moncler said in a statement, which would imply LVMH indirectly owning 4.1% of the Italian company known for its shiny ski jackets.
Shares in Moncler were up 10% to 57.3 euros as of 1000 GMT on Sept. 27, while LVMH was up roughly 2%.
Share price round-trip for Moncler and LVMH so far in 2024 https://reut.rs/4egMhij
Editing by Liam Proud and Streisand Neto
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