The Cost of Luxury: PPR’s Final Gucci Bill To Approach $9 Billion

With its days as a public company nearly over, Gucci Group will become a wholly owned subsidiary of Pinault-Printemps-Redoute at a cost of close to $9 billion.

PARIS — Gucci Group’s days as a public company are near an end — at a cost to Pinault-Printemps-Redoute of close to $9 billion.

At the conclusion Thursday of its monthlong tender offer, PPR owned 99.23 percent of Gucci’s shares, setting the stage for the expected delisting of the Italian luxury conglomerate. Gucci is now expected to become a wholly owned subsidiary of PPR.

PPR is extending its tender offer through May 20, as required under Dutch law and as part of the settlement agreement struck in 2001 that saw PPR rival LVMH Moët Hennessy Louis Vuitton sell its Gucci stake left over from its attempt to take over the Italian company in 1999.

Should any shares be outstanding after that, PPR can launch a “squeeze out” of any stragglers.

The financial market has long considered delisting a fait accompli, given that PPR would assume full management control and that Gucci’s supervisory board and two major banks deemed the offer fair and advised minority shareholders to accept it.

At the outset of the offer, PPR owned 67.58 percent of the company and offered $85.52 a share.

In accordance with Dutch law, where Gucci is incorporated, the company held an exceptional shareholders’ meeting in Amsterdam last week to discuss the offer, and the slim turnout spoke to the lack of ambiguity about the stock’s future.

PPR launched its tender offer on April 1 and had not given any indication of its progress until it closed on Thursday. But Gucci’s largest minority shareholder, Credit Agricole SA, indicated early in the offer that it would tender its 8.5 percent stake, which would elevate PPR’s holding beyond 75 percent. Those 8.6 million shares came at a cost of $732 million.

To buy all the 32 percent of Gucci stock it didn’t own at the start of the offer, PPR said the operation would cost about $2.5 billion, raising the final amount it paid for all of Gucci to about $8.78 billion, or 7.2 billion euros.

Meanwhile, in a filing with the U.S. Securities and Exchange Commission, Gucci released some details of its budget for the next few years. Gucci sees revenue growth of 9.3 percent for this year, 12.2 percent in 2005 and 9.6 percent in 2006. Gucci had revenues of $3.18 billion, or 2.59 billion euros, in 2003.
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