Michael Kors is making good on moves to compete as a global luxury House of Brands following the acquisition of Jimmy Choo for a step pausing 1.3 billion dollars.
The transaction followed months of rumors and speculation, and came as little surprise to the industry. It marked the emergence of a second luxury American House of Brands to emerge this year.
John D. Idol, chairman and CEO of Michael Kors, told media in press releases “We are pleased to announce the acquisition of Jimmy Choo, an iconic brand with a rich history as a leading global luxury house. Jimmy Choo is known worldwide for its glamorous and fashion-forward footwear.
Jimmy Choo, will operate as it does prior to the purchase, under its existing management team of Pierre Denis, chief executive officer, and Sandra Choi, creative director.
The only change is that it operates under the Michael Kors umbrella.
An umbrella looking to get larger and to compete with global coglomerates like LVMH.
Pierre Denis has led the company since 2012, during which time Jimmy Choo experienced compounded sales growth of 11 percent annually. Despite the considerable losses of the past few quarters, during one of the worst retail crashes in recent memory
That said, Denis has more than 25 years of experience and a strong track record with global fashion luxury brands.
Sandra Choi will continue to lead the creative and design teams at the company. Sandra has been with Jimmy Choo since its inception and has been the sole creative director since 2013.
“Jimmy Choo is a premier fashion luxury house that offers distinctive footwear, handbags and other accessories,” said Michael Kors, who serves as the honorary chairman and chief creative officer of his self named design house. “We admire the glamorous style and trendsetting nature of Jimmy Choo designs. We look forward to welcoming Jimmy Choo to our luxury group.”
Pierre Denis, CEO of Jimmy Choo, said, “It is a privilege for our management team to lead Jimmy Choo and to preside over such an exciting period for our company. We are convinced that there is so much more that can be delivered in the years ahead. We look forward to working closely with the leadership and team at Michael Kors Holdings Limited to further develop our iconic brand. Our two companies share the same vision of style and trend leadership. Our luxury heritage is the foundation of Jimmy Choo and we will continue to bring our brand vision to consumers globally.”
Luca Solca, managing director at Exane BNP Paribas had a crisper point of view on the acquistion when he spoke about the matter.
He told press that “again, Michael Kors follows the path of Coach — and again on steroids.”
And indeed, the Kors announcement followed the earlier acquisition of Kate Spade by Coach for $2.4 billion in cash. Coach has since rebranded itself as Tapestry.
But Solca didnt stop there, describing the motivations behind the tightly financed move.
“After a meteoric rise and spectacular crash, it is now the time to recycle cash into other brands, with higher residual equity. And again, it is shoes the accessible American brands zero in on. It is fortunate for JAB Luxury and JC shareholders that such a bidder is there. The decision to put assets for sale looked like a very long shot, but it is seemingly paying off,” he said with admirably faint praise.
According to its press relations dispatches, the iconic Jimmy Choo is a luxury accessories brand that offers an empowered sense of glamour and a playfully daring spirit.
Since its inception in 1996, the company has offered distinctive, glamorous and fashion-forward products, with luxury footwear at the heart of its unique brand DNA.
The brand began as a bespoke atelier that catered to the global luxury consumer, and continues to be popular with style icons around the globe, including celebrities, royalty, musicians and heads of state. Jimmy Choo offers exceptionally crafted products of the highest quality, with a design team that is at the forefront of interpreting fashion trends in footwear and accessories. The collections reflect a mix of iconic, timeless products that appeals to a broader audience, as well as innovative offerings that are targeted to fashion trendsetters globally.
With approximately 150 company-operated retail stores, 560 multi-brand doors and more than 60 franchise stores in premier locations worldwide, Jimmy Choo has a successful, balanced distribution network. The company has a strong presence in Europe, the Middle East, the Americas and Asia. In addition, Jimmy Choo continues to invest significantly in its online platform, which has experienced strong revenue growth in recent years.
The company also continues to build its presence in accessories and men’s footwear. The brand has a natural authority in men’s evening shoes, adding a twist to classic shapes, and has also seen strong growth in luxury active footwear. By integrating a dual gender product portfolio into its retail stores, Jimmy Choo hopes to unlock additional value from this fast growing segment of the business.
The acquisition of Jimmy Choo is expected to deliver a number of benefits, including:
The opportunity to grow Jimmy Choo sales to $1 billion
A more balanced portfolio with greater product diversification
An enhanced positioning in the attractive and growing luxury footwear segment
The opportunity to grow in the men’s luxury footwear category
Further expansion in the luxury accessories market
Greater exposure to global markets, particularly the fast-growing market in Asia
The potential to create long-term operational synergies
The transaction is not subject to a financing condition. Michael Kors has committed bridge financing from JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA to satisfy the certain funds requirement of the U.K. Takeover Code to complete the transaction.
The transaction is intended to be effected by a U.K. court-approved Scheme of Arrangement and is expected to close in the fourth quarter of calendar 2017, subject to customary closing conditions, including the receipt of required regulatory approvals as well as the approval of the Scheme by Jimmy Choo shareholders, who together hold at least 75 percent of the issued share capital of Jimmy Choo and represent a majority of the shareholders voting at the meeting.
Michael Kors has received irrevocable undertakings from JAB Luxury GmbH, Jimmy Choo directors and Sandra Choi, who collectively represent 69.21 percent of the issued and outstanding Jimmy Choo shares in support of the transaction.
This will not be Michael Kors’ last acquisition.
Michael Kors is focused on forming a luxury group, as the company has laid out in its 2020 plan, a strategic move with the goal of returning to growth by 2018.