PPR makes $7 billion bid for Puma
FRANKFURT: By G. Thomas Sims
The French luxury goods retailer PPR has bid about $7 billion for Puma, the German sporting goods company, promising to keep its chief executive, Jochen Zeitz, at the helm of the company he turned around.
The question is whether Puma investors will continue to show the same confidence in Zeitz, who emphatically endorsed the deal, and sell their shares to PPR, or whether they will resist and put Europe on course for yet another cross-border takeover battle.
PPR, famous for its Gucci and Yves Saint Laurent brands, said Tuesday that it had acquired a 27.1 percent stake in Puma for \1.4 billion, or $1.88 billion, and that it would offer \330 each for the remaining shares, valuing the company at $7.08 billion. But the share price rose \29.68, or 9.4 percent, on Tuesday to \343.93 on the Frankfurt Stock Exchange, and some bankers were already recommending that shareholders reject PPRs offer.
HVB, a unit of UniCredit, advised investors to hold out. Uwe Weinreich, an analyst at the Munich bank, said that he expected the share price to rise to \400.
Zeitz was to face investors on Wednesday at Pumas annual shareholders meeting.
“It will not be easy,” said Roland Koenen of Bankhaus Lampe in D?sseldorf. “Questions will come about whether the offer is fair.”
Zeitz took over Puma 14 years ago at the age of 30 and has transformed it from an unprofitable manufacturer of track-and-field clothing into a designer of trendy sportswear. As Zeitz reminded shareholders in a letter this year, the value of the company has risen 4,300 percent during his tenure.
But European investors have rejected other deals recently, as this decades fast economic growth makes them more vocal and confident. For example, E.On, the German energy giant, abandoned its yearlong attempt to acquire its Spanish counterpart, Endesa, last week, in part because shareholders held out for a higher price.
Activist shareholders in Europe have also forced ABN Amro, the Dutch bank, to consider a sale, merger or breakup, while DaimlerChrysler has put its American car unit, Chrysler, on the block after years of investor protests.
Though a maker of sneakers and sportswear might at first glance seem like an odd fit for a company known for luxury, PPR and analysts say that purchasing Puma would immediately add to sales, profitability and scope at a company that has long been subject to the ups and downs of the French consumer market.
Fran?ois-Henri Pinault, the billionaire who is chairman of PPR, called the deal “a milestone in our strategy of profitable growth.”
It also makes perfect sense to Zeitz, whose success in turning Puma around has long stirred speculation that the company is a takeover candidate, perhaps with Nike, its American rival, as the acquirer. There is precedent for such a trans-Atlantic deal; the German shoe manufacturer Adidas bought Reebok, an American rival, in 2005.
PPR bought the stake in Puma from Guenter and Daniela Herz, siblings who bought into the company a few years ago. The Herz family controls the Tchibo coffee empire and are among the wealthiest Germans.
PPR insisted that it would not raise its offer, partly to protect its credit rating, which is close to junk status. Standard Poors, the ratings agency, warned that a price of \330 a share could hurt the French companys ratings, even though it added that “acquiring Puma would provide PPR with an international brand carrying strong worldwide recognition, as well as diversification into the sportswear industry, which enjoys strong growth prospects.”
When Zeitz took over Puma, he was the youngest executive of a major German public company. His effort to create a sports lifestyle brand, as he calls it, took off in earnest in 1999 when the company began opening stores in California and later in cities like London, Rome, Tokyo, and most recently, in New York. In 2004, he hired the designer Philippe Starck to design shoes, and recently he started a shoe collection with Alexander McQueen, whose label is controlled by PPR. Puma traces its origins to 1924, when the brothers Adolf and Rudolf Dassler founded a shoe company that later provided the shoes that the American sprinter Jesse Owens wore in the 1936 Olympics in Berlin. In 1948, after a quarrel, the brothers split the business. Rudolf called his business Puma; his brother, known as Adi, called his Adidas.
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