Could a merger between Kering and Richemont be on the cards?
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Could a merger between Kering and Richemont be on the cards?

French luxury conglomerate LVMH is the world’s largest luxury company – but Richemont (known for watch and jewelry brands like Cartier and Van Cleef & Arpels) and Kering (the owner of fashion brands like Gucci) aren’t far behind. In a recent article for Business of Fashion, Exane BNP Paribas luxury analyst Luca Solca suggests that the two should merge in order to take the fight more convincingly to LVMH: “there comes a time when even big-thinking companies need to think bigger in order to secure and optimise their achievements.”

All three luxury titans have seen positive performance over the past 12 months

graph 2303 kering

SOURCE: Yahoo Finance

Writing in Bloomberg Gadfly, Marcus Ashworth and Andrea Felsted ruminate on the possibility of a merger between Kering and Richemont, noting that it “would blend the French group's strength in fashion and leather goods, with the Swiss company's prowess in watches and jewelry, and challenge the might of LVMH.”

As luxury has returned to growth, led by a Chinese revival in confidence and the apparent petering out of president Xi Jingping’s anti-corruption drive, the stage is set for a restructure. This has been quite clear over the first three months of the year: all three companies have moved around their top talent and bought and sold brands that suited (or didn’t suit) them. Most recently, we’ve seen Kering divest itself of Puma, and Richemont commit to buying the half of Yoox Net-a-Porter that it doesn’t already own.

With what looks to be more success on the cards for 2018, is it time for Kering and Richemont to consider a united front against LVMH?

Disclosure

Dominion holds LVMH, Kering, and Richemont in its Global Trends Luxury Fund.


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