The Choo fits for US re­tailer Michael Kors

Amer­i­can com­pany snaps up premier shoe­maker for $1.2bn

The Star Early Edition - - INTERNATIONAL - Kate Holton

US RE­TAILER Michael Kors has agreed to buy lux­ury shoe­maker Jimmy Choo for $1.2 bil­lion (R15.6bn), snap­ping up a Bri­tish com­pany whose tow­er­ing stilet­tos have been made fa­mous by celebrity cus­tomers from Princess Diana to Ken­dall Jen­ner.

The move comes two months af­ter ri­val hand­bag maker Coach struck a deal to buy quirky fashion brand Kate Spade & Com­pany, as so-called af­ford­able lux­ury com­pa­nies look to go into new mar­kets to try to lift flag­ging sales.

“Jimmy Choo is an iconic premier lux­ury brand that of­fers dis­tinc­tive footwear, hand­bags and other ac­ces­sories,” said Michael Kors, honorary chair­per­son and chief cre­ative of­fi­cer.

“We ad­mire the glam­orous style and trend-set­ting na­ture of Jimmy Choo de­signs.”

Founded by be­spoke shoe­maker Jimmy Choo in Lon­don’s East End in the 1990s, Jimmy Choo listed at 140p in 2014 and will sell out at 230p.

Its strong per­for­mance stands in con­trast to Michael Kors which has lost 65 per­cent of its mar­ket value since 2014 due to fierce com­pe­ti­tion at the more af­ford­able end of the lux­ury mar­ket and a drop in cus­tomers at de­part­ment stores.

Michael Kors, which has tried to fight back by ex­pand­ing into dresses and menswear and its on­line busi­ness, said in May that sales at stores es­tab­lished for more than a year fell 14 per­cent in its fis­cal fourth quar­ter.

Un­der the terms of the deal, it will pay a pre­mium of 36.5 per­cent to buy Jimmy Choo com­pared with the Bri­tish firm’s share price be­fore it was put up for sale.

At 10.15am, Jimmy Choo shares were up 17 per­cent at 228.25p.

The com­pany makes three quar­ters of its rev­enue from sell­ing shoes and has a pres­ence across the world, in­clud­ing about 150 com­pany-op­er­ated re­tail stores.

Beren­berg an­a­lyst Zuzanna Pusz said the deal fol­lowed in the foot­steps of Coach’s re­cent ac­qui­si­tion and showed US ac­ces­si­ble lux­ury com­pa­nies were pur­su­ing the multi­brand strat­egy found in Europe, where cash flows from one large brand are rein­vested into smaller but faster-grow­ing ones.

Pusz said it was prob­a­bly a sen­si­ble move in the long term, with com­pe­ti­tion un­likely to wane any time soon.

“Mul­ti­ple com­pa­nies such as Jimmy Choo, Prada, Fer­rag­amo and Cucinelli have gone public over the past cou­ple of years with the in­ten­tion of fi­nanc­ing their re­tail ex­pan­sion plans, thus ac­cel­er­at­ing their in­vest­ments and giv­ing the lux­ury con­sumer glob­ally more choice of brands any­where they go.”

Jimmy Choo put it­self up for sale in April af­ter its ma­jor­ity-owner JAB, the in­vest­ment ve­hi­cle of Ger­many’s bil­lion­aire Reimann fam­ily, sig­nalled its in­ten­tion to fo­cus on con­sumer goods in­stead. JAB is also con­sid­er­ing a sale of Bally In­ter­na­tional, the Swiss lux­ury shoes and ac­ces­sories com­pany.

The deal is the lat­est in a string of for­eign takeovers of UK com­pa­nies, as buy­ers abroad take ad­van­tage of a drop in the value of ster­ling since Bri­tain voted to leave the EU in June last year.

Michael Kors, which said it had JAB’s back­ing for the deal, pledged to use its own in­fra­struc­ture to help Jimmy Choo grow fur­ther via store open­ings and on­line.

Jimmy Choo will con­tinue to be led by the same man­age­ment team, in­clud­ing cre­ative di­rec­tor San­dra Choi, who joined the com­pany at its in­cep­tion.

Gold­man Sachs and JP Mor­gan acted for Michael Kors on the deal, while Mer­rill Lynch, Cit­i­group, Liberum and RBC Europe acted for Jimmy Choo.

PHOTO: BLOOMBERG

Lux­ury shoe­maker Jimmy Choo’s shares shot up at the news of the deal.

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