LVMH Expands Industry Influence With Investment in Moncler — 2nd Update

By Andrea Figueras

French luxury heavyweight LVMH is investing in Moncler in a transaction that gives it a seat on the board of the Italian fashion company, best known for its pricey puffer jackets.

The deal further expands the influence of Bernard Arnaut's LVMH across the fashion industry. Arnault has cobbled together a fashion and luxury conglomerate spanning fine wines, hotels, jewelry and luxury retail. LVMH is one of Europe's biggest companies by market value.

It and rival Gucci owner Kering have grown into luxury behemoths. Moncler is among a still-significant number of high end luxury houses that have remained independent.

The Italian premium fashion brand offers outdoor fashion items, including its well known puffer jackets, which can sell for more than $7,000 each.

The agreement between LVMH and a holding company controlled by Remo Ruffini, Moncler's chief executive, gives LVMH an indirect stake in Moncler while reinforcing Ruffini's position as Moncler's largest shareholder.

Shares in Moncler traded 10% higher midday. The gain reversed the stock's losses this year, leaving them up 2.6% since the start of 2024. Luxury stocks were up broadly this week, fueled by Chinese economic stimulus measures. LVMH has jumped nearly 18% this week, while Kering and Cartier parent Richemont have risen around 17% and 18%, respectively.

LVMH Chairman and CEO Bernard Arnault said the investment supports Moncler's independence, though analysts have long considered Moncler a potential takeover candidate.

Under the agreement, LVMH is buying a 10% stake in Double R--an investment vehicle controlled by Ruffini's holding company--in an agreement that will see Double R buy additional Moncler shares, the companies said late Thursday.

Under the terms of the deal, LVMH will further increase its stake in Double R up to a maximum of about 22%. The funds from that investment will go toward Double R increasing its stake in Moncler to up to 18.5% from around 15.8% over the next 18 months, the companies said.

Once achieved, LVMH will have an indirect interest of around 4% in Moncler, Citi analyst Thomas Chauvet wrote in a research note. The initial investment gives LVMH an indirect stake in Moncler of roughly 1.6%, Chauvet said.

As an indirect shareholder in Moncler, LVMH will be able to appoint one member to the Italian company's board. LVMH will also have the right to appoint two board members to Double R's board, the companies said.

From LVMH's perspective, the deal seems opportune given current weakness across the luxury sector, RBC Capital Markets analysts Piral Dadhania and Nikolaos Lafioniatis said in a note.

The French company--a bellwether for the industry--and many of its peers have been grappling with a slowdown in sales growth after a postpandemic boom in demand.

European luxury brands are facing a tough environment particularly in China, a longtime growth engine for the sector, as the country continues to face an economic malaise leading some consumers to save instead of splurging on expensive clothes and accessories.

Moncler is among the companies that has best weathered the slowdown in Chinese demand hurting much of the European industry. It reported an 11% rise in revenue at constant currency for the first half, driven by growth in Asia.

For the Italian company, the agreement offers the backstop of financial support if needed in the future, which seems unlikely given Moncler's strong credentials as a standalone group, RBC analysts said.

--Pierre Bertrand contributed to this article.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

September 27, 2024 06:25 ET (10:25 GMT)

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