Jimmy Choo's Acquisition Price Is Too High?

According to the world clothing and shoe net, this Tuesday, the United States light luxury group.

Agreed to buy British luxury shoe brands at 896 million pounds (US $1 billion 200 million).

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In April of this year, Jimmy Choo announced that it was seeking a public sale. This decision was supported by major shareholder and European investment giant JAB Holdings (hereinafter referred to as JAB).

Meanwhile, JAB announced that its other luxury brand Bally will also be open for sale, and will shift its focus to consumer goods such as food and beverage in the future.

It has been rumored that Jimmy Choo's bidders also include: China Private Equity Fund Hongyi investment and Jimmy Choo

Perfume licensing authority Interparfums, private equity fund CVC Capital Partners, finally Michael Kors wins.

The price quoted by Michael Kors is 230 pence per share, which is 36.5% higher than the share price announced by Jimmy Choo when it seeks to sell, which is 18% higher than the 195 pence premium at Monday closing price, about 17.5 times the Jimmy Choo adjusted EBITDA (interest tax depreciation and amortization profit before 2016), which is 2.46 times of 2016 sales.

After the news, Jimmy Choo's share price rose 17.1% to 2.28 pounds per share on Tuesday, but it is still below its 2.30 purchase price per share.

Michael Kors shares closed up 0.1%, to $34.93 per share.

Not long ago, one of the main competitors of Michael Kors, another US luxury brand Coach bought Kate Spade for $2 billion 400 million. The paction price was only 9.2 times that of the latter 2016, 1.74 times the annual sales, and the two figure was much lower than the price given by Michael Kors for Jimmy Choo.

Many people believe that the price of this Michael Kors for Jimmy Choo is too high.

In this regard, Michael Kors's chairman and CEO John Idol said that comparing the price of LVMH group, Kering (Kai Yun group) or luxury goods giants such as Prada when buying independent brands, the price of this Michael Kors can only be considered as a moderate level.

For Michael Kors, what they value more is whether Jimmy Choo can create value for them in the long run.

In a report last month, Barclays, an investment bank, said that Jimmy Choo still has great room for growth, especially in the global market.

Barclay said in the report: "the number of global stores in Jimmy Choo is only 150. We think this figure can be increased to 250.

Their popularity in China is also high, so continuing to open more stores in China will greatly boost their growth. "

Idol also said: "we want to acquire a brand that has a history and connotation, and has a certain scale. The annual sales volume of Jimmy Choo has reached over US $500 million, and global sales are expected to grow to more than US $1 billion. The main growth point in the future is the Asian market which is yet to be developed."

After the acquisition of Jimmy Choo, the proportion of footwear business to Michael Kors sales will increase from 11% to 17%, and the brands will remain independent.

In the 2016 fiscal year ending December 31st, Jimmy Choo achieved sales of 3.64 billion, an increase of 14.5% over the same period last year. However, the growth rate of the fixed exchange rate increased by only 1.6%.

In the 2016 fiscal year, Jimmy Choo has opened 10 new outlets.

By the end of December 31, 2016, the total number of Jimmy Choo stores in the world has reached 150.

In the first half of the year, the overall market situation was weak, and the annual sales of the stores decreased by 0.8%, but the performance in the second half of this year has been greatly improved.

Coach group has been doing the same thing in the past two years. In addition to defeating Michael Kors in the competition and successfully acquiring Kate Spade, it also acquired the high-end ladies shoes brand Stuart Weitzman in 2015.

At present, with the change of consumer habits and the rise of electricity providers, Coach and Michael Kors have seen opportunities.

Their frequent takeover is in order to achieve the same goal: create a multi brand giant enterprise in the field of light luxury.

Victor Luis, chief executive of Coach, said after completing the paction of Kate Spade, "we will create the first modern luxury group in New York."

John Idol emphasizes that Michael Kors will continue to look for suitable acquisition targets after completing the integration of Jimmy Choo, and its vision will no longer be confined to the United States.

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Of course, Coach and Michael Kors, such a radical takeover, is not without any risk.

The rapid increase of business scale in a short period of time may cause a huge impact on the structure and operation of the company, thus putting them in a very unfavorable position. This is not uncommon in the luxury industry.

Michael Dart, partner of A.T. Kearney, a private equity fund, said: "the customer groups of two companies are different in price orientation and main attack areas. In this case, takeover is a risky behavior."

Last December, Berkshire Partners, a private equity fund, acquired a minority stake in Kendra Scott, a fashion jewellery brand. According to the paction price, the value of Kendra Scott reached 15 times that of EBITDA.

Last June, the majority shareholder of Italy's luxury brand Valentino, the Mayhoola for Investments of Qatar's Royal Investment Agency, acquired most of the French luxury brand Pierre Balmain, and its paction valuation also reached 15 times that of the latter EBITDA.

Joseph Kors, managing partner of Sandbridge Capital, a private equity fund, said: "Michael Kors" bought the Jimmy Choo at such a high price, sending a signal to the market: if you are a global luxury brand, then your selling price will reach more than 15 times of EBITDA, which will have a great impact on the future purchase price.

With the continuous downturn of the retail market, the integration of enterprises is an inevitable trend.

More interesting reports, please pay attention to the world clothing shoes and hats net.