France’s Kering pares stake in Puma to focus on luxury brands

An employee arranges a Puma running shoe display inside the sportswear company's concept store at the Puma SE headquarters in Herzogenaurach, Germany, on Thursday, Feb. 9, 2017. Photographer: Alex Kraus/Bloomberg

French luxury group Kering SA is relinquishing control of Puma SE after about a decade, acknowledging that its expertise rests with catwalk brands like Gucci and Saint Laurent rather than developing the German track-and-field outfitter.

Under the terms of the agreement, Kering will distribute to its investors 70 percent of the shares of Puma. The plan leaves Kering founder Francois Pinault’s holding company Artemis with about 29 percent of Puma shares, and the group will remain a long-term strategic shareholder, according to a statement. Kering would retain about 16 percent of Puma’s outstanding shares.

“The Puma divestiture materializing sooner rather than later will add oomph to the stock,” wrote Luca Solca, an analyst at Exane BNP Paribas. “We celebrate this as a landmark achievement for Kering.”

Kering bought Puma in 2007 as part of a push into sport and lifestyle brands that also saw the group acquire skateboarding brand Volcom. Puma was seen at the time as a pioneer for its fusion of fashion and performance clothing and its collaborations with designers from Philippe Starck to Alexander McQueen. Kering follows rivals in cleaning up its portfolio after LVMH sold Donna Karan and Hermes divested Leica.

“The contemplated distribution of Puma shares to our shareholders would be a significant milestone in the history of the group,” Kering Chairman Francois-Henri Pinault, the son of Francois Pinault, said in the statement. “Kering would dedicate itself entirely to the development of its luxury houses.”

Integration Struggles

Under Kering’s ownership, initiatives like the higher-priced Fenty Puma by Rihanna collection have helped the apparel maker boost brand image and profitability after a period when low desirability and an overextended store network had made for an unpopular match with investors. But Kering struggled to integrate it firmly into its stable of other brands, and the company has promised shareholders it would work toward becoming a pure player in luxury.

Terms of the share distribution are under review and will be submitted to Kering shareholders for a vote on April 26, the company said. Exane analyst Solca said he estimates the ratio should be about one Puma share for each 12 of Kering.

The younger Pinault has gradually pushed Kering’s portfolio upmarket since the company took a controlling stake in Gucci in 2001. His family, which also owns the auction house Christie’s, sold its 24.3 percent stake in the French books-and-electronics group Fnac Darty SA last July.

Kering will sell its remaining lifestyle holding, Volcom, “when the time is right,” and a solution is found that is good for both Kering and the brand, Chief Financial Officer Jean-Marc Duplaix said in a call with reporters.

“This was a simple, rapid way of creating value for our investors or giving them the option to sell,” he said of the transaction.

Puma is based in the German provincial town of Herzogenaurach, the same city as Adidas AG. The two companies were founded by brothers, and both had an early core foothold in soccer. Adidas is by far the bigger of the two by sales and market value, while Puma has sought to burnish its credentials in street fashion and collaborations with music superstars like Rihanna.

“The eventual sale of the remaining stake in Puma will give Kering additional resources to finance possible acquisitions or to accelerate their debt repayment,” wrote Mario Ortelli, an analyst at Sanford C. Bernstein.