2017-07-25 05:45:02
Michael Kors to Buy Jimmy Choo in $1.2 Billion Deal

LONDON — Michael Kors has picked out some new shoes to go with its handbags.

On Tuesday, Michael Kors Holdings said it had agreed to buy the luxury shoe company Jimmy Choo for 896 million pounds, or about $1.2 billion, the latest push by an American luxury conglomerate to find sources of growth in an increasingly competitive retail landscape.

Many upscale brands are grappling with plummeting sales and tepid profits. Mall traffic in North America has declined sharply, and deep discounting tactics have resulted in luxury labels losing much of their luster with core customers.

To make matters worse, shoppers who have traditionally been loyal to the so-called middle market have gravitated toward brands at extremes of the style, and price, spectrum. That has benefited e-commerce giants like Amazon, fast-fashion brands like H&M and Zara, and luxury houses like Gucci.

And it has left companies like Michael Kors — once the runaway leader of the “accessible luxury market” — exposed.

Michael Kors, known for fashion-forward designs and competitive prices, has been hit particularly hard after overreaching in a rapid expansion effort.

In May, it downgraded its sales forecasts for the rest of the year, and said it would close as many as 125 of its full-price retail stores. Its share price has lost a fifth of its value in 2017. .

The deal for Jimmy Choo, however, could give it a new avenue for growth.

“We believe that Jimmy Choo is poised for meaningful growth in the future,” John D. Idol, the Michael Kors chairman and chief executive, said in a news release. “We are committed to supporting the strong brand equity that Jimmy Choo has built over the last 20 years.”

Michael Kors said it expected to open new Jimmy Choo retail stores and develop the brand’s online presence, and to expand the assortment of its fashion offerings.

The sale came almost three years after Jimmy Choo went public. The brand had put itself up for sale in April as the Reimann family, the reclusive German consumer goods billionaires who had owned it, looked to reduce their luxury holdings.

Under the terms of the transaction with Michael Kors, Jimmy Choo investors would receive 230 pence for each share they own, representing a 36.5 premium to the share price in April before the company announced it was putting itself up for sale.

Shares of Jimmy Choo closed at 195 pence on Monday.

Jimmy Choo said its board of directors intended to unanimously recommend that shareholders vote in favor of the transaction. JAB Holding, a Reimann company and Jimmy Choo’s largest shareholder with a 67.7 percent stake, has agreed to vote in favor of the takeover.

“A combination with Michael Kors will allow Jimmy Choo to embark on its next phase of growth and provide opportunities for the benefit of Jimmy Choo customers, employees, shareholders and other stakeholders,” Peter Harf, the Jimmy Choo chairman, said in a news release.

After the transaction, Jimmy Choo will operate under its existing management team within the Michael Kors organization, the companies said.

JAB Holding also said in April that it was undertaking a strategic review of the Swiss leather goods brand Bally. A review of Belstaff, the British motocross-inspired brand acquired in 2008, is expected as well.

The privately held Reimann company has built a coffee and food empire in the United States in the past five years by acquiring American coffee businesses, including Peet’s Coffee & Tea, Caribou Coffee and Keurig Green Mountain. In April, it agreed to buy the sandwich chain Panera Bread for $7.5 billion, including debt.

Goldman Sachs and J.P. Morgan advised Michael Kors, while Bank of America Merrill Lynch and Citigroup advised Jimmy Choo.