Exor’s €541 million Acquisition of Christian Louboutin
Deal Overview
· Announcement Date: 8 March, 2021
· Industry: Luxury goods/Consumer
· Deal value: €541 million (24% stake)
Company Details: EXO:MIL
· Founded: 1927
· HQ: Amsterdam, Netherlands
· Market cap: €17.38 billion
· EV: €23.06 billion
· TTM Revenue: €121.63 billion
Exor N.V., one of Europe’s largest investment holding companies is controlled (52.99%) by the Italian Agnelli family through privately held company Giovanni Agnelli B.V whose legacy encapsulates a heavily-diversified portfolio, brimming with alternative asset classes, real estate and financials. Perhaps the most well-known venture was Agnelli’s establishment of Fabbrica Italiana Automobili (FIAT) in 1899 whose automotive investment journey soared, eventually amalgamating Ferrari into the Fiat dynasty in 1969. Exor now has a majority stake in the luxury Italian sports car company. Real estate is at the heart of Exor’s portfolio; investing in a number of centrally located properties within Paris in 1991 and in 2007, acquiring control of Cushman & Wakefield, the largest U.S privately-held commercial real estate firm.
2019 was a stellar year for Exor, recording revenues of $144 billion, crowning it as the world’s 28th largest group by revenue, according to the 2020 Fortune Global 500 List. Exor’s glory was soon clouded upon by the company’s performance during 2020, as a result of the pandemic that hampered the luxury goods industry.
While recent figures may prove to be disappointing, Exor’s diversified portfolio, comprising of real estate, luxury cars, amongst others, could see their future glitter. Exor’s real estate portfolio is set to capitalise on the positive outlook for property, driving innovation, with 43% of investors resonating with ESG investments, leading the demand for ‘green’ buildings. Greater volumes of private investment into the property market on the horizon. Private investors deployed 9% of capital in 2020, above the 10-year trailing average, a theme that is likely to continue as a greater proportion of UHNWIs seek to invest into bricks and mortar.
Luxury cars, a key collectible asset, experienced a 6% increase in demand during 2020 following a bleak 2019. Ferrari sales accelerated during the pandemic, with the HAGI F index (used to track the rare Ferrari market) up 14%. As live auctions resume post-pandemic, this could lead to an uptick in demand for classic cars, among other collectibles. While equity markets remain choppy in the near-term, investors are likely to turn their attention to assets that can serve as a safe haven in addition to a potential inflation hedge that is inching up.
Company Details: Christian Louboutin
· Founded: 1991
· HQ: Paris, France
· EV: £1.97 billion
· Revenue (2019): £50.2 million
Christian Louboutin, having been founded three decades ago, have over 150 stylish stores worldwide, spanning across 30 countries and have diversified its core business to include men’s shoes and an exquisite collection of handbags and other leather goods.
Christian Louboutin’s coveted red-soul shoes have inherited a timeless legacy, spanning generations whose iconic shoes have been worn by royalty and celebrities alike; worn by Carrie Bradshaw in ‘Sex and The City’. Louboutin has also designed shoes inspired by artists Julio Le Parc, Piet Mondrian, and Andy Warhol, whose flowers influenced the Pensée and were the first pair of shoes to be adorned with a red soul.
The People’s Princess: A tribute
Christian Louboutin ‘Love Shoes’ were inspired by Princess Diana after her infamous photograph, sitting alone on a bench in front of the mausoleum in Agra, India, encapsulating loneliness and a longing to be loved. That particular photo inspired Christian to send her a message through a pair of black flats featuring the letters L O V E in red patent leather. Sadly, Princess Diana never had the chance to wear the Love shoes before her untimely death in Paris, 1997.
Strategic Rationale
Growth of the UHWI Population
Christian Louboutin’s stores are concentrated in the United States, with little penetration in the Asian continent, presenting Exor with an opportunity to develop Louboutin into a truly global brand through expansion into the region.
While the US will remain the world’s dominant wealth hub over the next five years, Asia will experience the steepest growth in UHNWIs over this period, at a rate of 39% compared with the global average of 27%. With Exor’s long-standing reputation, experience and expertise, they can harness growth in a geographical location that remains wholly untapped; home to more billionaires than any other region.
Exor’s lucrative penetration into the luxury goods market really took off last year, after acquiring majority stake in Shang Xia, a luxury Chinese lifestyle brand, co-owned by Hermès, for c. €80 million. This will provide Exor with the opportunity to capitalise from rising wealth trends, particularly within East Asia; China is poised to witness explosive growth its wealthiest residents by c. 246% in the next five years.
While most regions have experienced a slump in luxury goods’ sales, China experienced something quite different; doubling their overall share of the luxury market during 2020 alone. It is likely that this growth will be sustained, setting China on track to claim the largest share of the global luxury market by 2025. To quote Napoleon Bonaparte: “China is a sleeping giant, let her sleep for when she wakes, she will rule the world”, his foresight is certainly bearing fruit.
Cultivating a truly global presence
The addition of Christian Louboutin’s brand will comfortably sit in Exor’s diverse portfolio marking a bid to consolidate its market share within the luxury goods market, competing with the likes of LVMH and Richemond, who dominate brand ownership.
The symbiotic relationship between the Exor and Christian Louboutin will cultivate a robust presence within the luxury goods market, championing highly talented and creative teams with every purchase, immersing consumers in an unforgettable experience marred with colour, joy and festivity.
Risks
2020: All doom and no glamour?
The pandemic has adversely affected the luxury goods market, shrinking by 23% last year with Western Europe taking the biggest hit. Notably, Switzerland have seen a contraction of more than 25%, yielding the largest regional decline.
A contraction in consumer confidence has been partly responsible for the slump in luxury goods sales, as sentiment turned sour. The latter half of 2021 will be a key indicator as to the long-term direction performance in the luxury goods sector.
While many of Christian Louboutin’s magnificent shopfronts remained closed for much of the duration of 2020, Louboutin flaunted its unique creativity, hosting a number of exhibitions, captivating the interest of thousands of people, adding colour to what has been an otherwise difficult year.
This was a brilliant means of ensuring that his brand remains at the forefront of people’s minds ahead of the opening of its retail stores. Christian’s vision was to “give a view into a dream world”; where passion and art collided. This is a manifestation of the sheer creativity that his brand has inherited, ensuring that every customer’s interaction is tailored to them, bestowing an unforgettable experience.
Ecommerce: future revenue driver
The pandemic has, crucially, decelerated globalisation, with the outlook for international travel looking bleak in the near-term. Coupled with the lack of international travel, Louboutin’s loyal customers have not been able to enter into the dreamland of its stores.
The strength of its ecommerce platform will have been tested this past year and whose viability as a business will solely depend on it. The good news for Louboutin is that they have been growing their ecommerce presence for a number of years, capturing year-on-year increase in online-based revenues whose platform boasts a user friendly, speedy, yet relaxing experience with a seamless checkout.
Louboutin’s website includes live catalogue browsing; the online equivalent of flicking through a hard copy of Vogue. The online experience has been all the more appealing due to the added feature of being able to pre-order goods ahead of their release, generating excitement, promoting an air of exclusivity among its customer base.
Exor will work closely with Louboutin’s dedicated team, appointing two of its seven board members, marking the start of a very exciting relationship between two world-renowned, household names; an inflexion point within the luxury goods industry.
When will the deal go through?
The transaction is anticipated to close during Q2 of 2021
By Dinah Wolf, Cass Business School
