The PPR-Puma case explores the issue of evaluating the acquisition of Puma by the PPR group. Starting from the assessment of the business strategy and the analysis of the competitive scenario and firm-specific positioning, the case moves to a sound financial analysis and company valuation to be carried out with the objective to assess the actual value of the target company and the potential synergies to be achieved by the bidder. PPR is a very well-known player in the retail and luxury business, with a long-time experience (often not very successful) in the M&A market, because of the consolidation lived by the fashion and luxury industry in the past few years, and has now chosen to buy the German sportswear company to diversify its activity including a high-growth business in its consolidation area. The announcement of the acquisition took place on 10th April 2007, when PPR announced a tender offer to purchase the remaining 73% of the Puma shares, after a friendly agreement with Mayfair, major Puma shareholder, to purchase its 27.1% stake. The offer price for both the stake purchase and the tender offer was 330 euros, with a premium of 15.8% (ex-dividend) to the closing price on April 4th. The implied multiples of the offer price were equal to 12.2x 2006EBITDA and 13.4x 2006EBIT. The financial market reaction to the announcement of the deal has been strongly positive. The acquisition was finalised in July with a total 62.1% acceptance by Puma shareholders. The acquisition has been considered from a huge part of the financial arena as 'not compliant' with the PPR strategy, since PPR was believed to position itself in the luxury market. However, the top management of the two companies strongly supported the view that the deal was based on a sound strategic rationale and that the synergies derived from the acquisition might enlighten an incredible fit between Puma and PPR. The case allows an interesting discussion and analysis of the main financial and strategic aspects of the deal.
Ppr - Puma: a successful acquisition?
BUONGIORNO, MASSIMO;ROVETTA, BARBARA
2010
Abstract
The PPR-Puma case explores the issue of evaluating the acquisition of Puma by the PPR group. Starting from the assessment of the business strategy and the analysis of the competitive scenario and firm-specific positioning, the case moves to a sound financial analysis and company valuation to be carried out with the objective to assess the actual value of the target company and the potential synergies to be achieved by the bidder. PPR is a very well-known player in the retail and luxury business, with a long-time experience (often not very successful) in the M&A market, because of the consolidation lived by the fashion and luxury industry in the past few years, and has now chosen to buy the German sportswear company to diversify its activity including a high-growth business in its consolidation area. The announcement of the acquisition took place on 10th April 2007, when PPR announced a tender offer to purchase the remaining 73% of the Puma shares, after a friendly agreement with Mayfair, major Puma shareholder, to purchase its 27.1% stake. The offer price for both the stake purchase and the tender offer was 330 euros, with a premium of 15.8% (ex-dividend) to the closing price on April 4th. The implied multiples of the offer price were equal to 12.2x 2006EBITDA and 13.4x 2006EBIT. The financial market reaction to the announcement of the deal has been strongly positive. The acquisition was finalised in July with a total 62.1% acceptance by Puma shareholders. The acquisition has been considered from a huge part of the financial arena as 'not compliant' with the PPR strategy, since PPR was believed to position itself in the luxury market. However, the top management of the two companies strongly supported the view that the deal was based on a sound strategic rationale and that the synergies derived from the acquisition might enlighten an incredible fit between Puma and PPR. The case allows an interesting discussion and analysis of the main financial and strategic aspects of the deal.
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