LVMH Said to Eye Douglas as Talks Over Buyout Drag On

LVMH Moet Hennessy Louis Vuitton CEO Bernard Arnault
Bernard Arnault, chairman and chief executive officer of LVMH Moet Hennessy Louis Vuitton. Photographer: Balint Porneczi/Bloomberg

Bernard Arnault may be prepared to discuss a deal with Douglas Holding AG as the German perfume and makeup retailer’s negotiations with private equity firms falter, according to people with knowledge of the matter.

Douglas and Arnault’s LVMH Moet Hennessy Louis Vuitton SA have made preliminary contact, said the people, who declined to be identified because the talks are private. There have been no formal discussions because Douglas’s Kreke family would prefer to take the company private and buy out other shareholders with the help of financial investors, they said.

Talks with BC Partners Holdings Ltd., Apax Partners LLP and Permira Advisers LLP to delist the company have stumbled recently amid doubts about the support of Douglas’s two other biggest shareholders and the performance of the company’s book unit, the people said.

Hutchison Whampoa Ltd., which runs European retailers Marionnaud and Superdrug, is another potential trade buyer that could reap cost savings with Douglas, said the people, who declined to be identified because the process is private. LVMH, based in Paris, owns the Sephora chain of cosmetics stores.

“A strategic buyer makes sense,” said Klaus Kraenzle, an analyst at Silvia Quandt & Cie., in a phone interview. “It would make it easier to restructure the company in a family environment. It’s not clear in what direction Douglas wants to go, but it’s certainly an additional opportunity.”

Douglas shares rose as much as 3.5 percent to 35.39 euros in Frankfurt trading and were up 2.6 percent by 10:47 a.m. local time, valuing the Hagen-based company at 1.4 billion euros ($1.8 billion).

Douglas has more than 1,100 perfume stores in 18 European countries, according to its website. It also owns the Thalia bookstore chain and jewelry, fashion and sweets stores.

Douglas Shareholders

The Kreke family controls 12.7 percent of Douglas, Europe’s largest retailer of makeup and perfume. Henning Kreke is chief executive officer and Joern Kreke is chairman. Dr. Oetker Group, a German foodmaker that holds 25.8 percent, and Erwin Mueller, who owns almost 11 percent and has options for another 15 percent, haven’t said publicly whether they are willing to sell their stakes to Kreke and the private equity firms.

Spokesmen for Douglas, LVMH, Hutchison, Dr. Oetker, Mueller, BC Partners, Apax and Permira declined to comment.

Henning Kreke told shareholders on March 21 that he won’t exclude delisting its “undervalued” stock and confirmed talks with financial investors, saying the outcome remains completely open. The Kreke family would prefer a deal with financial investors because they could continue running the company they founded, the people said.

Douglas stock has jumped more than 37 percent since the Wall Street Journal reported on Jan. 12 that the three buyout firms were in talks with the Kreke family about taking it private.

Douglas forecasts that sales this fiscal year will total 3.4 billion euros, with earnings before interest, taxes, depreciation and amortization falling to within a range of 200 million euros to 250 million euros because of restructuring costs at its Thalia bookstore unit.

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