Kering to Spin Off Puma, Saying Goodbye to Sports Lifestyle

Posted January 11, 2018 7:35 p.m. EST

LONDON — Kering, the owner of high-fashion labels such as Gucci, Saint Laurent and Alexander McQueen, is getting out of the sports lifestyle business.

On Thursday, the French conglomerate said it would spin off the German sports brand Puma to its shareholders, the final move in a series of deals brokered by Kering as part of its transformation into a pure luxury player. The move is a signal of Kering’s belief in the health of the highest end of the consumer market.

The group said that it planned to distribute 70 percent of Puma shares in kind to existing Kering investors, out of the 86 percent it currently owns. Kering would retain the 16 percent of shares left outstanding. Artémis, the holding company of France’s billionaire Pinault family that holds 41 percent of Kering shares, would then become a “long-term strategic shareholder” in Puma, with an ownership stake of about 29 percent. The number of Puma’s publicly traded shares would be increased to approximately 55 percent, a statement said.

Speculation that Kering would divest Puma has been long-standing. The group first acquired a majority stake in Puma in 2007 for 5.3 billion euros (about $7 billion) as part of a move into the athletics and lifestyle arena. However, Puma underperformed and consistently posted flat sales, only seeing a turnaround in 2015.

By that stage Kering — which started in 1963 as a trader of timber and construction materials, eventually moving in and out of sectors as opportunity allowed — had divested most of its non-luxury assets, such as French retail brand Printemps and the catalog label La Redoute, and narrowed its focus to increasing market share in the fast-growing, high-margin world of global luxury.

Puma’s size prevented Kering from finding an appropriate new owner for Puma, and a sale on the open market could have led to discounts on the stock. That led to the conglomerate’s decision to divest shares to Kering shareholders.

“The contemplated distribution of Puma shares to our shareholders would be a significant milestone in the history of the group,” said Kering’s chairman and chief executive, François-Henri Pinault. “Kering would then dedicate itself entirely to the development of its luxury houses.”

Puma, which is expected to report its full-year results Feb. 12, said it welcomed the transaction because it would increase the number of the company’s publicly traded shares and added that the move will not affect its strategy for building its business. Company shares have soared by 45 percent over the last 12 months, bringing its market capitalization to 5.3 billion euros, in line with the value at which Kering originally bought the brand.

Analysts also appeared to support the deal as a positive move for Kering, which has seen its stock soar in the wake of a recent recovery in the global luxury market. The rally was fueled in particular by a resurgence in the popularity of Gucci and Saint Laurent, despite a recent tax inquiry by the Italian police.

“We celebrate this as a landmark achievement for Kering,” Luca Solca, head of luxury at Exane BNP Paris, wrote in a note to investors, “and a sign that the luxury goods industry is progressing in its consolidation and rationalization.”