Kering Taking Care Of Business
Kering (BATS:KER), owner of Gucci, Balenciaga, Brioni and Yves Saint Laurent to name a few, accomplished a stunning feat recently, seemingly quietly in an all-cash deal to acquire Creed for €3.5 billion ($3.83 billion).
Creed, a company with a time-honored heritage, prestige, and pedigree, originating all the way from the 1760s – being the official supplier to the royal household in Paris, has been evolving fragrances and garments over 260 years, through seven generations – could not be acquired for centuries by any luxury goods conglomerate.
Yet somehow, Kering pulled it off, an unanticipated win making away with the prize jewel to be added to its holdings of luxury brands, catapulting them to enter the beauty industry, their new initiative, with panache.
So how was this acquisition even made possible, considering Creed’s generational history?
It seems masterfully, in 2020, the perfume house of Creed was sold to BlackRock Long Term Private Capital and Javier Ferrán, chairman of publicly traded Diageo, potentially paving an unforeseen pathway for Kering that might not have existed otherwise. Could Blackrock have purchased Creed almost three years ago for this specific reason? To package and gift-wrap Creed for the right guest?
It would be hard to believe there were no other mighty companies in line to compete in the bid for the royal gem, that is Creed, especially with giants in the Fragrance Market like LVMH (BATS:MC), Estee Lauder Companies Inc (NYSE:EL), and owner of Giorgio Armani perfume – L’Oréal Group (BATS:OR).
Why does Kering, over the luxury behemoths, even have a shot in the fragrance and cosmetics market? In Feb, 2023 Kering announced industry veteran Raffaella Cornoaggia, previously senior vice president and general manager of International Business Estee Lauder to be spearheading Kering Beauté. It is clear Kering is preparing while also offensively making strategic maneuvers, from absorbing credible brands to the restructuring of its new ranks. Additionally, CEO of Gucci, Marco Bizzarri will be leaving Kering’s main brand on Sep 23 2023, to be replaced by Jean-François Palus as new CEO, for the transition period, who is the current managing director of Kering.
As if all this wasn’t enough, Kering has recently made another skillful approach – purchasing a 30% stake for €1.7 billion in Valentino: an Italian fashion label, currently owned by Mayhoola, the Qatari royal family, which was purchased in 2012, founded by designer Valentino Garavani in Rome ,1960. Along with an added option to purchase 100% of Valentino by 2028 which has 211 stores worldwide with a revenue of €1.4Bn and €350Mn Ebitda.
Kering is clearly taking care of business in a segment that is not full of exciting news and developments.