NEW YORK CITY—In the second major consolidation of fashion brands this year, Michael Kors Holdings Ltd. said Tuesday it had agreed to acquire London-based Jimmy Choo PLC in an all-cash deal valued at approximately US$1.35 billion. Michael Kors plans to expand the footwear brand's presence in both brick-and-mortar and e-commerce channels.
“We believe that Jimmy Choo is poised for meaningful growth in the future and our company is committed to supporting the strong brand equity that Jimmy Choo has built over the past 20 years,” says John D. Idol, chairman and CEO at Michael Kors. He adds that Pierre Dennis, CEO of Jimmy Choo since 2012, will continue in that capacity, and creative director Sandra Choi will continue to lead the creative and design teams at the company.
Founded in 1996, Jimmy Choo has counted Michelle Obama, Beyonce and Sarah Jessica Parker among its most famous wearers. The brand had sales of $470 million in 2016; its new owners' goal is to increase that to $1 billion annually.
The combined company will have pro forma sales of $5 billion and a store count of 977 owned locations, including 150 Jimmy Choo stores. Much of Michael Kors' brick-and-mortar distribution is through outlet centers and department stores—retail channels in which deep discounting is commonplace.
Same-store sales were off 14% year over year, Michael Kors said in its most recent quarterly report this past May. Bloomberg Business reported Tuesday that Michael Kors' stock has lost nearly two-thirds of its value since peaking in February 2014, and that lately the company has reduced its department store presence in an effort to regain exclusivity. Among other gains, the Jimmy Choo deal will increase Michael Kors' presence in Asia, where just 9% of Michael Kors' sales occur compared to 30% for Jimmy Choo.
The deal is also seen as a way to diversify the Michael Kors product line, while increasing the company's position in the footwear market. Footwear represents 11% of Michael Kors' sales, compared to 75% of Jimmy Choo's; the acquisition will increase that category's presence for the combined company to 17.5% of sales. Reuters reported Tuesday that the Jimmy Choo acquisition also squares with the multi-brand approach now prevalent among European fashion houses.
The per-share price of 230 pence represents a 35% premium on Jimmy Choo's closing price on April 21, the day before the company's board announced that it was up for sale.The sale announcement occurred amid owner JAB Holding Co.'s plans to reduce its luxury-brand presence and focus instead on consumer goods, typified by its $7.5-billion privatization of Panera Bread this past April.
In a regulatory filing Tuesday, JAB, the investment arm of Germany's Reimann family, said it would vote its shares in favor of the deal. The deal is expected to close in the fourth quarter. Goldman Sachs and JP Morgan are providing Michael Kors with bridge financing on the deal. Jimmy Choo was advised by Merrill Lynch, Citigroup, Liberum and RBC Europe.
This past May, another New York City-based luxury brand, Coach Inc., said it would combine with Kate Spade & Co. The all-cash transaction was valued at $2.4 billion.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
