PPR to acquire sportswear firm Volcom
French retailer and luxury goods group PPR is to buy surfing-inspired clothing firm Volcom for $607.5 million.
PPR will make a tender offer to acquire all outstanding Volcom shares for $24.50 a share, a 37% premium over their three-month average trading price, it announced on Monday 2 May, 2011.
The deal marks the latest step in chief executive Francois-Henri Pinault’s strategy of spending some of the EUR2.4 billion raised from selling African distribution business CFAO and French furniture retailer Conforama.
Described by Mr Pinault on Monday as “one of the world’s most desirable global action sports brands,” Volcom is identified with California snowboard and skate culture.
The company’s T-shirts, hooded sweatshirts and other clothes are sold by retailers and 13 stores in the US.
Some Volcom directors and officers, who own 14.4% of the outstanding shares, have already agreed to tender their shares and the company’s board has recommended that other shareholders do the same. The deal is expected to close in the third quarter.
Mr Pinault recently told the Financial Times in an interview that PPR would use the sales proceeds to pay off debt and make small to medium-sized acquisitions.
“If you buy something that is already big, it is very difficult to offset the acquisition premium,” he told the newspaper.
Volcom last year made a net profit of $22.3 million on revenue up 14% at $323.2 million.
Two thirds of its sales come from the US with Europe its second-biggest market.
PPR said in a conference call on Monday it aimed to lift Volcom’s operating margin above the 19% reached in 2007, a year marked by license repurchases. In 2010 its margin was 9.4%.
PPR's finance director Jean-Francois Palus said he expected Volcom to start lifting the group’s earnings next year but many analysts expect the impact to be negligible.
