JAB Puts Jimmy Choo, Bally Up For Sale To Focus On Coffee…
Written by Paul Jarvis and Ruth David
Investment firm shifts away from luxury as food business grows
JAB regards stiletto maker, Swiss shoe brand as non-core
The billionaire Reimann family’s investment vehicle is unwinding its luxury holdings, putting shoemakers Jimmy Choo Plc and Bally International AG up for sale to focus on the food and beverage operations it has spent billions expanding in recent years.
The Vienna-based family’s JAB Holding Co. said Monday it’s reviewing strategic options for both companies at a time when it’s snapping up U.S. coffee chains and a China-led revival in demand has boosted luxury valuations.
“We consider disposals of JAB’s luxury business make sense as they do not offer the same cost synergy advantages as the company’s other businesses in the fast-moving consumer goods sector,” Jeanine Arnold, senior analyst at Moody’s, said in a note.
The announcements signal the end of a nearly decade-long involvement in high-end shoemaking for JAB that started when its Labelux unit bought Bally in 2008. More recently, the closely held company has fixed its focus on food and beverages, buying the likes of Caribou Coffee Co., Krispy Kreme Doughnuts and Panera Bread.
JAB said it has made a “strategic decision” to focus on consumer goods, including a 37 percent stake in cosmetics maker Coty Inc. The announcement made no mention of British jacket-maker Belstaff, which also forms part of JAB’s luxury-goods portfolio.
Jimmy Choo, whose fans have ranged from the late Princess Diana to the fictional Carrie Bradshaw of “Sex and the City,” was acquired by private-equity investors three times before being bought by JAB for more than 500 million pounds in 2011. JAB sold a stake in a 2014 initial public offering, though with a 68 percent holding remains the company’s majority owner.
The shoemaker is “under-represented in many markets,” Antoine Belge, an analyst at HSBC, said by email. “The issue is that the company underestimated the cost of retail expansion. Being part of a larger group could help in that regard.”
The company’s revenue rose 15 percent last year to 364 million pounds, boosted by the fall in the pound since the U.K.’s vote to leave the European Union, which increases the value of overseas sales when converted into the British currency.
Jimmy Choo could attract interest from luxury companies in Asia, the U.S. and Europe, as well as private-equity firms, according to people familiar with the matter. JAB is likely to gauge takeover interest among companies such as Michael Kors Holdings Ltd., LVMH, Kering and Coach Inc., in addition to billionaire brothers Victor and William Fung, who control Li & Fung Ltd. of Hong Kong, the people said. Mayhoola for Investments LLC, the Qatari royal family’s investment fund, could also look at the shoemaker as a way to bolster its luxury presence, they said.
“What remains to be seen is whether growing interest from Asia and the Middle East for luxury U.K. brands will see Jimmy Choo receiving offers from foreign buyers searching for well-known British brands,” said Jonathan Buxton, partner and head of consumer at Cavendish Corporate Finance.
Andrea Resnick, a Coach spokeswoman, declined to comment on “rumors and speculation.” LVMH, Michael Kors and Kering declined to comment and the Fungs and Mayhoola did not respond immediately.
The sale process is likely to be completed by the end of the summer, Jimmy Choo said, adding that it had not received any approaches.
Bally, known for suede driving shoes and leather man bags, was previously owned by U.S. buyout firm TPG Inc., which struggled to turn it around after years of losses. At the time it was acquired by Labelux, it had more than 400 million Swiss francs ($402 million) in annual sales.
The Bally review is expected to be completed in the second half of this year, JAB said.
Bank of America Merrill Lynch and Citigroup are handling the auctions of both Jimmy Choo and Bally, according to JAB statements.