Puma Jumps On Acquisition Talk
Puma, the German sportswear company known for its leaping-cat logo, could soon land in the closet of Paris-based luxury group PPR. Shares in Frankfurt-listed Puma soared 10% on Apr. 5 on rumors that PPR, owner of Gucci Group, is in talks to acquire nearly 30% of Puma from two key shareholders. Neither company will comment.
Analysts say a tieup makes sense—even though at first blush, it’s hard to see the connection between PPR’s gold-plated fashion brands and Puma’s athletic shoes and sports attire. But under CEO Jochen Zeitz, Puma has successfully repositioned itself as a "lifestyle" brand, teaming up with designers such as Neil Barrett and Jil Sander, while introducing new product lines such as travel gear.
"It’s a premium brand, and it could benefit from the retailing expertise of Gucci," says Armando Branchini, who heads the Milan-based InterCorporate luxury consultancy.
PPR, for its part, has been looking for a more casual brand to supplement its luxury lineup, which includes Yves St. Laurent, leather-goods maker Bottega Veneta, and smaller design houses such as Balenciaga and Stella McCartney. With $24.7 billion in sales last year, PPR has ample resources to polish Puma’s cachet—for example, by opening flagship boutiques in major cities, Branchini says.
Takeover speculation has swirled around Puma since billionaire siblings Guenter and Daniela Herz, the company’s two biggest shareholders, boosted their stake last year from 17% to almost 30%. Nike also has been mentioned as a possible buyer.
But according to reports in French news media and The Wall Street Journal, the Herzes are in advanced discussions with PPR for a deal that would value Puma at $7.2 billion. PPR might eventually seek to take majority control of the company.
Certainly, Puma is in solid shape (see BusinessWeek.com, 4/19/06, "Puma is on the Prowl Again"). Sales last year soared 33%, to $3.17 billion, and though earnings slumped 7.8% because of heavy spending on World Cup sponsorships, analysts at Merrill Lynch recently upgraded the stock to "buy," as they forecast double-digit profit growth for at least the next three years.