By
Bloomberg
Published
September 30, 2024
Bernard Arnault just got a hotline to some more bling. But he might have to wait for the call. His LVMH Moet Hennessy Louis Vuitton SE has agreed to invest in Moncler SpA, the Italian luxury brand best known for the padded down jacket worn by Drake in the “Hotline Bling” music video.
Arnault, the chairman and chief executive officer of LVMH, might not be about to immediately fold Moncler into his luxury empire. But he is in pole position if ever Chairman and CEO Remo Ruffini were to sell. And, along the way, Moncler could transform itself into an Italian LVMH — making it an even more useful addition to Arnault’s portfolio.
LVMH has acquired a 10% stake in Double R, the investment vehicle through which the Ruffini family holds its interest in Moncler. Double R owns a 15.8% stake in Moncler, implying an indirect 1.58% for LVMH. Shares in Moncler rose as much as 15%.
Under the terms of the deal, LVMH will increase its stake in Double R to 22%, lifting its interest in Moncler to 4%. It will also have two seats on the Double R board, and one at Moncler.
The transaction is a surprising one. For a start, Moncler has been a strong performer, thanks to its core outerwear offerings, primarily those down jackets, and the excitement created through its Genius program, whereby it works with a roster of outside designers and hosts events in different locations around the world. As with the rest of the luxury sector, its sales growth has slowed and its shares fallen — but it doesn’t need support from LVMH.
Though Moncler would of course be a useful addition to the French giant’s fashion and leather goods division, the group has more obvious white space to fill, primarily in watches, skincare and hospitality.
But Ruffini has traditionally worked with a partner at the investment company level. This was first Singapore’s state investor Temasek, then the Rivetti family, known for Stone Island, the Italian casual fashion brand Moncler bought four years ago. The latter recently exited, creating an opening. What better partner to have next than LVMH, the world’s biggest luxury company, blessed with a strong balance sheet and some of the industry’s biggest brands?
With the purchase of Stone Island, Moncler signaled that it was a buyer, opening the potential for it to become a new house of luxury. LVMH could provide further firepower, and with valuations tumbling, there could be fresh opportunities. Burberry Group Plc, for example, is expected to focus on outerwear under new CEO Joshua Schulman, making the British luxury brand potentially interesting for Moncler.
In turn, LVMH gets a fresh collaboration partner for its maisons, including Louis Vuitton and Dior, as well as a window into one of its most successful competitors.
By adding to Moncler’s stable, Ruffini also demonstrated that he was not a seller of the whole company. Arnault said in a statement on Thursday that he supported “the independence of the Moncler Group.”
But with the investment, Arnault has put down a marker. He would be poised to strike if ever Ruffini were to seek a deal. That might be some ways off — Ruffini is 63, while Arnault is 75 — but LVMH has just leapfrogged competitors to the front of the queue.
Arch-rival Kering SA isn’t in a state to acquire right now. It is grappling with the turnaround of Gucci, while net debt excluding lease liabilities has swelled to €9.9 billion ($11.1 billion). But if it can revive Gucci and get other brands such as Balenciaga firing on all cylinders again, this hiatus may not last forever. Kering looked at Moncler in 2019, but a deal never came to fruition.
Arnault has taken a similar approach before, investing in Tod’s SpA and supporting its CEO Diego Della Valle until he was ready to delist the company earlier this year with LVMH-backed private equity firm L Catterton.
Luxury is all about the long term and acquiring the most prized assets: Once they are snapped up by a rival, they don’t come onto the market again. Even the Wolf in Cashmere is prepared to be patient for the brands that matter most.
