Hugo Boss Shares Decline After Report Permira Seeks Exit

Boss Chief Executive Officer Claus-Dietrich Lahrs
Under Chief Executive Officer Claus-Dietrich Lahrs, Boss shares have soared in the past five years. Photographer: Simon Dawson/Bloomberg

Hugo Boss AG shares dropped as much as 3.7 percent after people familiar with the matter said that Permira Advisers LLP is discussing a potential sale of its remaining stake in the German fashion house.

Permira, based in London, is in talks with advisers to find a buyer for its holding of about 50 percent in the German fashion label, valued at about 3.7 billion euros ($5 billion), Bloomberg News reported Aug. 1, citing people familiar with the matter. Hugo Boss slipped as much as 3.90 euros to 102 euros a share and traded 0.8 percent lower at 105 euros at 3:42 p.m. in Frankfurt trading.

Under Chief Executive Officer Claus-Dietrich Lahrs, Boss shares have soared in the past five years. The maker of perfume advertised by Gwyneth Paltrow and the slim-fitting duds worn by German national soccer coach Joachim Loew on the World Cup sidelines has been reclaiming control over its distribution and marketing by opening more of its own stores. The shares had gained 19 percent in the last 12 months as of their Aug. 1 close, compared to a 1.1 percent decline in the Bloomberg European Fashion Index.

Permira, which holds Metzingen, Germany-based Hugo Boss through its Red & Black investment vehicle, has cut its stake through two share sales in the past 18 months. The firm’s preference is to sell the stake in a single transaction because a series of sales to institutional investors could hurt the stock price, the people said.

“Currently there are no plans to sell the Hugo Boss shares,” a spokesman for Permira said in an e-mailed statement.

Possible Buyers

“In terms of a strategic buyer, we could see Polo Ralph Lauren or PVH,” said Kepler Cheuvreux analyst Juergen Kolb in a note to clients, referring to the owner of the Calvin Klein and Tommy Hilfiger labels. “For some luxury-goods companies, Hugo Boss may not be ‘luxury’ enough.” Another private equity firm could also be a possible buyer, the analyst said.

While Boss is known for ready-to-wear suits that can cost as little as 500 euros, under Lahrs the company is trying to broaden its appeal. He’s hired designer Jason Wu, who gained fame after designing Michelle Obama’s inaugural ball gowns, added stores operated by the company and is exerting more control over how clothes are displayed in high-end shops including Saks Fifth Avenue Inc.

Under German takeover law, when a buyer acquires at least 30 percent in a target company, it is required to make an offer to the remaining shareholders unless granted an exemption by Germany’s regulator BaFin. Red & Black had a 50 percent holding in Hugo Boss as of June 30, 2014.

Separately, Permira has also approached Roberto Cavalli SpA about a possible acquisition of a stake in the Italian fashion house, two people familiar with the matter said. The fashion and luxury industry is consolidating as large groups such as LVMH Moet Hennessy Louis Vuitton SA seek new sources of revenue and small companies turn to investors to help fund growth.

(An earlier version of this story incorrectly stated the size of Permira’s holding in the company.)

Before it's here, it's on the Bloomberg Terminal. LEARN MORE