The sale of part of the capital of Puma by the Kering group is not in favor of the sports equipment manufacturer. Puma gives up 2.2% to 91.56 euros while Kering is almost stable (-0.07% to 735 euros). The title of the sports equipment supplier is penalized by the influx of papers linked to the sale by the luxury giant of 5.9% of its capital for around 805 million euros. The French now only owns 4% of Puma. Kering is thus continuing its withdrawal from the German company, which began with the distribution of 70% of the capital to its shareholders in 2018. Last year, François-Henri Pinault’s group sold a similar stake for around 656 million euros.
The 805 million euros collected today will be allocated to Kering’s general needs and will further strengthen its financial structure. Kering acquired Puma in 2007 when, at the time, the French group wanted to make the German brand its second pillar alongside Gucci, its flagship in luxury. The sports brand was largely left behind by its two competitors, Nike and Adidas, and the objective was to boost its sales and profitability thanks in particular to partnerships with Usain Bolt in sports, and Rihanna and Kylie Jenner in lifestyle.
Kering, thanks to Millennials in both mature and emerging countries, ended up succeeding in its bet, but too late, from 2016-2017. As, at the same time, Gucci literally exploded, the group preferred to focus on luxury, a more profitable and less cyclical activity. In a note published this morning, Jefferies indicates that this new sale brings the free float of Puma to 66.7%. The war chest amassed by Kering could help finance an acquisition in luxury, continues the analyst. The latter observes that the sale comes after the title Puma shows again a positive balance since the beginning of the year and a gain of 15% compared to its low point of March.
The American broker, which remains to Buy on Puma, expects the market to be even more attentive to possible attacks by Kering on a luxury sector increasingly polarized between, on the one hand, the prosperous giants , and on the other, small and medium-sized brands weakened by the pandemic. He maintained his Buy recommendation and his target price of 755 euros on French. More cautious, UBS reiterated its Neutral opinion and its price target of 618 euros on Kering after this expected sale which should help fuel the long rise in the share.
However, he stresses that, as always after such a transaction, the question arises as to the use that Kering intends to make of its balance sheet given its solid financial position (net debt would represent, according to UBS, 0.2 times Ebitda) and its historical acquisition strategy. For Invest Securities, on the other hand, this sale “cannot be analyzed a priori as a prerequisite for carrying out external growth operations”.
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