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Speculation grows as PPR linked to Clarins buy

By Simon Pitman , 20-Nov-2007

French luxury products and retail group PPR is the latest company to be linked to a buy-out of one of the last remaining independent major cosmetics companies, Clarins.

PPR's fashion and fragrance division YSL is said to be interested in making a serious bid for Clarins, according to a report in business weekly newsletter La Lettre de l'Expansion.

 

 

 

The news has prompted Clarins' shares to rise further this week, up 7.7 per cent to reach $64.51 and giving the company an estimated market value of €2.63bn.

 

 

 

PPR owns leading French retail names such as FNAC and La Redoute, together with the Guccia fashion house, which, as well as YSL, also owns brand names such as Stella McCartney and Sergio Rossi. In 2006 the group had sales of €17.9bn.

 

 

 

 

 

PPR and Clarins, good fit

 

 

 

In accordance with the investment world, industry experts believe that the buy would be a good fit with the YSL Beaute brand, which already markets a number of leading high-end fragrance and cosmetic products, a similar target consumer to the Clarins product portfolio.

 

 

 

Created in 1971, the YSL brand has risen to become a leading player in the luxury fragrance and make-up category, increasing its position with the launch of a number of colour cosmetics products during the course of 2006.

 

 

 

The new launches were part of a restructuring programme aimed at boosting the presence of the relatively small brand in the luxury cosmetics field.

 

 

 

Over the course of the last few years PPR has divested significantly to create a slimmed down but more profitable portfolio.

 

 

 

Indeed, with the announced sale of its France Printemps retail business for just over €1bn, experts believe it is now in a good position to make further acquisitions.

 

 

 

Last week rumours centred on L'Oreal, after speculation that it was interested in acquiring Clarins prompted shares in the luxury cosmetics player to jump.

 

 

 

L'Oreal speculation

 

 

 

Speculation was fuelled after L'Oreal raised €1.5bn from the sale of its 1.8 per cent stake in pharmaceuticals giant Sanofi-Aventis, last Wednesday.

 

 

 

Industry experts widely believe that this move will free L'Oreal up to become more acquisitive in the coming months, as it continues to expand its market presence by concentrating on new niches.

 

 

 

Clarins is a relatively small player but an important brand because of its global associations with prestige skin care. The company had a turnover of €967m in 2006.

 

 

 

However, since the death of its founder earlier this year, speculation over Clarins' future has intensified, helping to boost its share price on the Paris Bourse, despite the fact that recent financial results have failed to shine.

 

 

 

Jacques Courtin-Clarins died in March this year and since then rumours over one of the industry's last remaining independent players have linked it to potential take-over bids by a number of leading industry players.

 

 

 

Clarins has been particularly hard hit by difficulties in the highly competitive US market, where sales fell heavily at the start of the year, but rallied for the most recent third quarter results.

 

 

 

Both PPR and L'Oreal executives have officially denied any speculation over a possible deal, but with reports also linking LVMH, Estee Lauder, Procter & Gamble and Beiersdorf as potential buyers, the bidding process could prove highly competitive.

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