PPR Acquires Italian Jeweler Pomellato to Boost Luxury Offer

PPR SA, the French owner of Gucci, agreed to buy a majority stake in Italian jeweler Pomellato from closely held RA.MO SpA and said it may look at acquiring other watch and jewelry brands to bolster its luxury offer.

Buying control of Pomellato is subject to competition authority approval and is expected to be completed in the coming weeks, Paris-based PPR said today in a statement. Financial terms and the size of the stake were not disclosed.

“We will probably look at some other opportunities on the market to grow our share of revenue” from watches and jewelry, PPR Chief Financial Officer Jean-Marc Duplaix said on a call to reporters, adding the company is not in talks with potential targets. “It’s an objective but it’s not a necessity.”

PPR shares rose as much as 4.2 percent, and were 1.3 percent higher at 174.85 euros by 1:34 p.m. in Paris. The company is valued at 22 billion euros ($28.6 billion).

Pomellato, known for its M’ama non m’ama stacking rings as well as the Dodo brand, has an enterprise value of 270 million euros to 300 million euros, according to Thomas Mesmin, an analyst at CA Cheuvreux in Paris. The acquisition is PPR’s fourth in the past year as it seeks to more than double its revenue to 24 billion euros by 2020.

“We have great ambitions for the Pomellato group,” PPR Chief Executive Officer Francois-Henri Pinault said in the statement. The company “will be able to step up the pace of its growth and expand its geographic footprint.”

Family Owners

Pino Rabolini, who founded Pomellato in 1967, is selling his stake in the company as part of the acquisition by PPR, Duplaix said on the call. The jeweler’s CEO Andrea Morante will retain a minority stake as well as his position, PPR’s CFO said, declining to be more specific. PPR would be open to buying the 18 percent of Pomellato held by the family owners of rival jeweler Damiani SpA, Duplaix said.

Pomellato, whose trinkets have been worn by Oscar-winning actress Tilda Swinton, had sales of 146 million euros in 2012, 81 percent of which came from Europe, PPR said. Last year’s earnings before interest, taxes, depreciation and amortization reached between 15 percent and 16 percent of sales, or 21.9 million euros to 23.4 million euros, Morante said on the call.

“We see as a positive that PPR increases its exposure to branded jewelry,” said Mario Ortelli, an analyst at Sanford C. Bernstein, who forecasts 9 percent compound annual growth for the category in the next five years.

Jewelry Brands

Pomellato received expressions of interest from at least four luxury goods makers including Prada SpA, according to a person familiar with the situation. PPR, which plans to change its name to Kering in June, has bought stakes in Chinese jeweler Qeelin, British fashion designer Christopher Kane and tannery France Croco in the past year. Its other jewelry brands include Boucheron.

“Becoming global brands is no longer an option for Pomellato and Dodo, it is a necessity,” Morante said in the statement. “With this in mind, we have undertaken a lengthy review of our best strategic alternatives and reached the conclusion that joining Kering was far and away the most favorable course of action.”