Art: Ethan Anderson
The French multinational company, PPR, which owns luxury brands like Gucci and Puma (the world’s third largest sportswear brand behind Nike and Adidas), announced on Monday that it would acquire Volcom for $607.5 million. PPR sees the acquisition as an opportunity to strengthen its sports brands in the world market.
“Our aim is to be a world-wide actor in sports and lifestyle,” PPR Chief Executive François-Henri Pinault told the Wall Street Journal. “We will ensure Volcom reaches the next stages in its development.”
Richard Woolcott, Volcom’s Chairman and Chief executive officer, said, “PPR is the perfect partner to help take the Volcom and Electric brands to the next level of success. For more than 20 years we have worked to inspire a movement that provokes freedom of thought and expression, and celebrated this spirit through our athletes, worldwide events, rock tours, feature films and, of course, our apparel. PPR, with its expertise gained through both Puma and its Luxury Group, could bring international market knowledge, sourcing capabilities and other operational expertise in areas such as product development and retailing to help the company grow Volcom globally, while preserving the elements that make the brands authentic.”
In this news release, Volcom’s managers unanimously recommended that its shareholders accept the offer, which represents a 37% premium over Volcom’s three-month average trading price.
At time of press, Volcom’s management had not yet responded to requests for comment.
According to the Wall Street Journal:
With the boost from Volcom, PPR expects its sports lifestyle division— which will also comprise Puma and the Cobra golf brand—to generate €5 billion ($7.4 billion) in sales by 2015, PPR’s chief financial officer said Monday. Last year, the division turned in €2.7 billion in sales. Last year, Volcom had sales of $323 million.
Volcom, like Puma, was hit hard by the consumer spending slump during the economic crisis, and its operating margin has not yet recovered.
Given the runaway ascent in production costs, anytime a brand portfolio such as PPR could combine two business units to gain scale, it’s good,” Wall Street Strategies analyst Brian Sozzi wrote in a research note.
PPR is offering $24.50 per Volcom share, a 37% premium to its three-month average. Volcom’s directors have agreed to sell their 14.4% stake to PPR, and they will remain with the company. PPR expects the deal to close by September.
