Investing.com -- LVMH (EPA:LVMH) on Thursday said it has purchased a 10% stake in Double R, Remo Ruffini's investment vehicle, which owns 15.8% of Moncler, indirectly giving LVMH a 1.58% stake in Moncler Group (BIT:MONC). LVMH will also have one board seat on Moncler and two on Double R.
Double R holds a major stake in Moncler, a globally renowned luxury outdoor and performance brand, further marking LVMH's interest in diversifying its portfolio within the luxury sector.
Through this partnership, LVMH will support Double R to increase its current holding in Moncler from about 15.8% to up to 18.5% over the next 18 months.
“Double R is expected to reinforce its control in Moncler up to a maximum of 18.5% funded by LVMH share purchases in the market over the next 18m. LVMH will own a maximum 22% stake in Double R (or ~4% in Moncler),” said analysts at Citi Research in a note.
LVMH will fund these future share purchases, which will also increase its own stake in Double R up to a maximum of 22%.
The French luxury conglomerate’s investment is expected to further reinforce Remo Ruffini's control as the largest shareholder of Moncler, enabling him to drive the company’s strategic direction and long-term development.
LVMH’s minority stake reinforces its long-term investment strategy in acquiring stakes in high-potential luxury brands while supporting their existing management teams.
“In the absence of share buybacks for LVMH (owing to uncertainty with French tax law treatment), and a lack of credibility and sufficiently large take-out targets, we view minority investments into already established groups as the next best alternative use of excess cash,” RBC (TSX:RY) added
For LVMH, the investment represents an opportunity to further diversify its brand portfolio with a strong presence in the fast-growing luxury outdoor and performance wear sector.
For Moncler, the partnership brings additional resources and support for future expansion and innovation in an increasingly dynamic market.
This investment comes at a time when the luxury sector is witnessing rapid growth, particularly in the outdoor and active lifestyle segments, where Moncler has already carved out a strong position.
“From LVMH's perspective, we view this deal as opportune given current weakness across the luxury sector, and translating to lower equity valuations (e.g. Moncler's Enterprise value is €13bn and its shares are down ~30% in the last six months),” said analysts from RBC
LVMH’s involvement is likely to further accelerate Moncler’s international growth, expand its product lines, and strengthen its positioning in new markets.