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Who Is Best Placed to Buy Jimmy Choo?

Valued at £700 million, Jimmy Choo is an acquisition target that could attract bids from private equity, foreign investors or luxury conglomerates.
Jimmy Choo's Spring/Summer 2017 campaign | Source: Courtesy
By
  • Limei Hoang

LONDON, United Kingdom — When Jimmy Choo announced on Monday that it is for sale, its shares jumped more than 10 percent on hopes that the luxury footwear brand would land into the hands of a new owner.

The company, which has been majority owned by JAB Luxury since 2011, said its board is conducting a review of strategic options to maximise value for shareholders, though at the time of its statement, had not received any bids.

Jimmy Choo, which is valued at around £700 million ($895 million), could attract attention from luxury conglomerates, which might use the acquisition to strengthen their accessories offerings. Coach Inc. has declared that it is on the lookout for brands to add to its portfolio; it acquired Stuart Weitzman in 2015 and is reported to be interested in Kate Spade.

Mario Ortelli, head of the luxury goods sector at Sanford C. Bernstein, believes that Jimmy Choo would not appeal to groups like LVMH and Kering, because — despite the possible integration synergies — it has limited possibilities to be successfully extended into other product categories in a short time frame.

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“Jimmy Choo has good brand positioning in women's shoes, which is one of the fastest growing product categories,‎ and has still room to develop its store footprint,” he tells BoF. “However the brand has limited opportunities to be successfully extended in other product categories like leather goods, where it currently lags far behind its shoes, in a short time frame."

Instead, Ortelli believes Coach might be keen on a possible acquisition. “Coach is looking to buy brands with aspirational luxury positioning and become one of the key groups in this segment. Jimmy Choo can fit into their framework,” he says.‎

Jimmy Choo could also generate interest from private equity buyers or investment firms in Asia and the Middle East. “For sure, this kind of investor would also be interested in buying Jimmy Choo,” says Ortelli of the latter. “If you look at the Middle East, Mayhoola has demonstrated its ability to develop a brand in a very good way … Or you can see investors coming from Asia that are also starting to do good things in the luxury sector.”

Jimmy Choo, which listed on the London Stock Exchange in 2014, has seen its share price bounce back over the past year, rising by a third, as demand for luxury goods begins to resurface. In March, the company reported revenue in 2016 rose by 14.5 percent and operating profits rose by 4.26 percent. However, on a like-for-like basis, sales only rose by 1.6 percent, as growth in China offset difficult trading in the US and Europe.

JAB Luxury — an arm of JAB Holding Company — released a statement stating that it was preparing to sell its other luxury shoe and handbag brand, Bally. JAB said that it was supportive of the Jimmy Choo sales process but does not intended to comment further until a decision on the possible strategic options have been made.

“It looks as if JAB joins the group of those who concluded that — after all — luxury is much more difficult than it looks at first sight,” says Luca Solca, head of luxury goods at Exane BNP Paribas.

“Creating shareholder value is not easy, especially when you pay top dollar to buy brands that potential industry buyers have passed on,” he adds. “Today’s announcement seems to confirm the notion that JAB investors are ready to draw a line and turn the page on the idea of creating a new luxury goods conglomerate.”

Jimmy Choo said the sale process is likely to be completed by the end of summer.

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