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Analysis of the purchase of Puma by PPR

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  1. PPR and Puma, two complementary businesses
    1. PPR: a global player in retail and luxury
    2. Puma's luxury sporting goods
    3. The bid
  2. Common interests of both entities
    1. PPR's expertise in the service of PUMA
    2. The positioning of PUMA, a strategic asset for PPR
  3. Puma: The first positive balance sheet
    1. A risky debt but controlled by PPR
    2. Preliminary results satisfactory
    3. However, a mixed effect on the stock market

PPR is a multinational group known and recognized worldwide for prestigious brands like Gucci. In 2007 it decided to make Puma its new prey. Indeed, PPR is a group which is accustomed to growing by acquiring companies in growing and very profitable sectors. The group was gradually built up by these acquisitions. It operates in almost all cases by making a takeover bid, which involves publicly proposing the purchase of a majority stake in the target company. In the case of Puma, PPR acquired the firm in a friendly takeover. The difference is that the leaders of the two companies involved agree on the terms of the merger prior to presenting them to the shareholders.

Puma, a multinational company present in over 80 countries, ranks third among the global sports brands, and brings major advantages for the retail and luxury giant. PPR is interested in companies which enjoy a high reputation, and brand image, and generate profits. This is the case of Puma, which recently became the most profitable company in its sector through differentiation its competitors. It is known for its more conventional and less luxurious design. This expertise has made the company Puma recognized as a "sportlifestyle". All this makes the Puma group an ideal target for investment by PPR but, many parallels which seemed ideal at first sight, failed to work.

It was therefore important to ask whether this friendly takeover bid for Puma allowed PPR to generate the expected benefits in order to recoup the initial investment and continue its international growth strategy. For this, it is necessary to study the approach adopted by PPR. We will start by describing these two complementary businesses while watching their synergies, and analyzing the financial impact of this merger.

The PPR Group has developed in several distinct phases that allowed it to be a group of international renown. The company first started in the wood sector, subsequently moving to specialized distribution and the general public, to finally get into the luxury sector.

Francois Pinault, the founder of PPR Breton, worked with a timber merchant based in Rennes, GAUTIER in the early 60's. At 26, he took the company over from his father. Initially a saw-mill at Trévérien, Ille-et-Vilaine, it developed by buying its competitors, to become one of the market leaders. Pinault was created in 1962, as a company specializing in timber and building materials. In 1976, the company already had 800 employees and a turnover of 600 million francs (about 91 million Euros). To follow his ambition to develop the business, Pinault moved to the Bourse de Paris in 1988.

The first step in the distribution was due to Francois Pinault's desire to build new, more buoyant markets than wood. This change resulted in the creation of Pinault SA, a leader who had anticipated a crisis of overproduction in wood, and increasingly complex regulations aimed at preserving the environment. He decided to acquire CAM in 1990, which included CDME, a distributor of electrical and Private Equipment, a company that rented equipment, and a specialist distributor to the United States.

[...] In Frankfurt, the stock of Puma increased by to 343 Euros, because of speculation about the bid. PPR's offer was therefore considered a "cheap" one according to Deutsche Bank. Small shareholders were invited by the Executive Board of Puma to participate in this process despite their dissatisfaction, because of the redemption price of the share. They were hoping for a revaluation of this offer, which did not happen. This transaction was subject to approval by European authorities, and to customary conditions and regulatory approvals that were issued in June. [...]


[...] 3-Key figures for the group The PPR Group achieved a turnover of 17.9 billion Euros in 2006, which is up higher than that of the previous year. This revenue has largely been achieved outside France ( 55.2 The development of websites of major brands has strongly developed the sales, as it accounts for revenue of 1.6 billion Euros earned via the Internet. This revenue is distributed unevenly between the distribution, which represents of the sales, and the luxury sector which represents only sales. [...]


[...] All this makes the Puma group an ideal target for investment by PPR but, many parallels which seemed ideal at first sight, failed to work. It was therefore important to ask whether this friendly takeover bid for Puma allowed PPR to generate the expected benefits in order to recoup the initial investment and continue its international growth strategy. For this, it is necessary to study the approach adopted by PPR. We will start by describing these two complementary businesses while watching their synergies, and analyzing the financial impact of this merger. [...]

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