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PPR Aims to Buy More Chinese Brands After Adding Qeelin

PPR SA CEO Pinault
Francois-Henri Pinault, chief executive officer of PPR SA, said PPR has “great ambitions” for the brand. Photographer: Simon Dawson/Bloomberg

PPR SA bought a majority stake in Chinese jeweler Qeelin for an undisclosed price and said it is looking to make more acquisitions in the Asian nation to bolster growth in its largest market for high-end goods.

Qeelin has 14 boutiques and its jewelry, which sells for HK$20,000 ($2,600) to HK$300,000, is also distributed in stores like Colette in Paris and Restir in Tokyo, Paris-based PPR said today. The transaction will probably close in January.

While PPR remains committed to non-acquisitive Chinese growth, “we’ll also be looking for mid-sized companies in China with a strong identity and strong growth prospects, if opportunity arises,” Alexis Babeau, managing director of PPR’s luxury division, said today on a conference call.

The acquisition of Qeelin, which is profitable, underscores China’s importance to global luxury companies that rely on its increasingly affluent shoppers to drive sales in the Asian country and overseas. More than half of the jeweler’s clients are mainland Chinese, said PPR, which follows competitor Hermes International SCA in owning a Chinese luxury brand. Hermes’s Shang Xia brand opened its first store in Shanghai in 2010.

By purchasing Qeelin, PPR aims “to develop its jewelry brands portfolio, which only contains Boucheron so far,” said Thomas Mesmin, an analyst at CA Cheuvreux in Paris who rates the shares outperform. The deal’s enterprise value is probably less than 75 million euros ($97 million) based on sales of about 30 million euros, he estimates.

PPR gained as much as 0.4 percent in Paris trading and was little changed at 141.90 euros at 11:49 a.m.

Asian Tourists

Sales of discretionary goods in China will grow at a compound annual rate of 13.4 percent between 2010 and 2020, McKinsey & Co. said in a report in March. Prada SpA, an Italian handbag maker, last week reported third-quarter earnings that beat estimates after Asian tourists fueled gains in Europe.

Qeelin runs seven boutiques in mainland China, four in Hong Kong and three in Europe. The “Qilin” is an auspicious Chinese mythical animal, PPR said. The brand sells fine jewelry, accessories and watches made of precious metals and stones.

PPR has “great ambitions” for the brand, PPR Chief Executive Officer Francois-Henri Pinault said in a statement.

The French maker of Bottega Veneta handbags and Puma sneakers is reorganizing to focus on luxury, sports and lifestyle brands as it seeks to lift sales to 24 billion euros by 2020.

Redcats, Fnac

PPR disposed of furniture retailer Conforama last year and agreed in October to sell Redcats’s U.S. sports and leisure business for $215 million. Last week, it agreed to sell the online retailer’s OneStopPlus large-size clothing business in a deal that implied an enterprise value of $525 million.

PPR, which also plans to spin off the Fnac music and electronics chain in 2013, has said it will use some of the proceeds from disposals for acquisitions. The company is interested in small and medium-sized luxury and sporting goods makers with growth potential, Pinault has said.

PPR agreed to buy Italian suitmaker Brioni Roman Style SpA last year for less than 350 million euros and surf, skate and snowboarding clothier Volcom Inc. for $608 million.

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