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Consequences of PPR's acquisition of Puma

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  1. Presentation of PPR and Puma
  2. Presentation of the Sector
  3. Presentation of the operation
  4. Decision and Executive Summary
  5. Annexes

We will study and analyze the acquisition by PPR group of German sporting goods company Puma which was finalized in August 2007.

We will discuss the following issues and concerns:
-Who are these groups? What are their core businesses?
-What reasons led to the takeover? What justification is given by the business portfolio and strategy led by PPR?
-What are the risks of power on both sides?
-What synergies can such an operation lead to?

In 1962, the company Pinault was born, initially it specialized in trading of timber and building materials.In the early 1990s, François Pinault took a first strategic shift by deciding to disinvest from the timber industry and turn to the general public and specialized distribution.The company decided to take control and bought CFAO, Conforama, Printemps, Fnac . Hence they got the name Pinault-Printemps-Redoute.

In 1999, the group took a second strategic shift, this time towards luxury, and acquired the brands such as Gucci, Yves Saint Laurent and Bottega Veneta, Balenciaga. In 2003, Francois Pinault assigned and transferred the succession of the business to his son Francois-Henri Pinault. The group will officially be noted as PPR from 2005.

PPR has demonstrated its ability to create and manage strategic changes with wood specialized distribution and consumer distribution to luxury.

Today, PPR focuses on two major divisions: it is the No. 1 among European supermarkets and No. 3 worldwide in luxury goods.

On one hand, the distribution corresponds to mass activities on markets that are stable and mature within which the group selects the segments of the most dynamic professions.On the other hand, luxury activities develop on all world markets, but show higher growth and profitability levels.

It is found that the distribution represents a significant volume for PPR (80% of its turnover in 2006), but the growth of this segment is much lower than that of luxury (+3.3% in 2006 against a rising sales of luxury from 17.6% in 2006) due to a weaker business environment. This is one reason why in 2006, the brand split some of its distribution activities such as Spring Orcanta, Kadéos, etc.

Is PPR heading to all-luxury model? Buying Puma seems to contradict this assertion.

PPR generates nearly half its sales in France and about 70% on the European continent.The second outlet is the American continent which accounted for 13% of sales in 2006. Finally, Africa generates 10% of consolidated sales through its subsidiary CFAO.

Tags: business portfolio of PPR, PPR's acquisition of Puma, luxury goods distribution

[...] Thus, the turnover of market is much increased (through acquisitions) and consumer demand.The largest acquisition was that of Reebok by Adidas. In 2006, the World Cup indeed played a role in achieving huge sales. Strategic Trends The apparel industry and sports equipment have shown a strong trend towards internationalization in recent years. The core players in the business are required to focus on marketing, advertising (about 15 to 16% of sales) and also on retail outlets. In the 90s, the sector evolved considerably since the image acquired by a product to market has become supreme. [...]

[...] Interest in the acquisition of Puma by PPR While the strategy of the PPR group seemed to be heading towards a direction for an orientation around exclusive luxury, it surprised markets with the acquisition of the German sporting goods company Puma. The main risk taken by PPR during its takeover was a misunderstanding of the markets about its future strategy. However, core players of the equity markets have responded very well to this acquisition. Undoubtedly, Puma keeps an exceptional growth potential.In addition, it operates in a particularly dynamic sector, the clothing and sporting equipment. [...]

[...] Moreover, given the figures of past it shows that PPR is a group that releases a lot of cash and therefore has the ability to reduce debt and its finances very quickly. In addition, the portfolio of activities of PPR is extensive and a new assignment can not be excluded. This would allow the group to repay much of its debt Decision and Executive Summary We, the SGBNP Bank, have been asked by leaders of PPR to study the acquisition of Puma with a friendly takeover of the funding made by debt. We conducted our analysis of the [...]

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