Burberry Gains on Speculation Trenchcoat Maker May Be Target

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  • Stock gains 6.8% in London, after falling 27% in past year
  • Shareholder activism `increasingly likely,' analyst says

Who Could Bid for Burberry?

Burberry Group Plc jumped on speculation that the U.K.’s biggest luxury-goods producer is setting up defenses against a potential takeover offer in response to stake building.

The stock advanced 6.8 percent to 1,464 pence at 11:08 a.m. in London, the day’s highest price, boosting the company’s market value to 6.5 billion pounds ($9.2 billion). Other luxury stocks also gained, with shares of Prada SpA rising 6.2 percent in Hong Kong.

Burberry asked its advisers at Robey Warshaw to help prepare a defense for a possible bid after a mystery investor built up a stake of about 5 percent in the trenchcoat maker, the Financial Times said, citing people close to the matter it didn’t identify. The company asked HSBC Holdings Plc, which is the custodian for the stake, to identify the client, though the bank refused, the newspaper said. HSBC reported the stake last month and said March 4 it dropped below 5 percent. A Burberry representative declined to comment.

Bid speculation is increasing after Burberry shares slid 27 percent in the past year. The company in January reported Christmas revenue that trailed its own forecast, hurt by a slump in demand in Hong Kong. Burberry is scaling back stores, cutting bonuses and consolidating products under one label after forecasting earnings will probably fall for a second straight year.

“In terms of a takeover target, Burberry’s valuation had reached the point where shareholder activism was increasingly likely in our view,” said John Guy, an analyst at MainFirst Bank AG. LVMH and Richemont are two major trade buyers that would have sufficient resources to make a bid, while Qataris could figure among private-equity bidders, he said.