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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.

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The filings also spell out how much PPR and Gucci executives stand to gain by cashing in their remaining stock options, as of March 31, at the $85.52 tender price. The top three are: De Sole, $4.2 million; Brian Blake, $2.8 million, and chief financial officer Robert Singer, $1.6 million.

Separately on Thursday, fresh signs emerged of a smooth transition for Gucci. The company confirmed that Renato Ricci, Gucci’s longtime human resources chief, would remain a consultant for one year.

Also Singer, who is exiting along with De Sole, has agreed to be available to provide consulting services to Gucci through the end of 2005.

But while PPR’s purchase of Gucci seemed an anticlimax, a delisting was not always seen as inevitable.

In an interview in 2002, Gucci Group chief executive Domenico De Sole said he would do everything in his power to goose the share price so the PPR put didn’t happen. At the time, the put price was set at $101 a share, but was subsequently reduced when Gucci returned cash to its shareholders, including PPR.

“PPR must honor their promise, and they will,” De Sole said at the time. “But from Day One, everybody — PPR included — agreed we should try to avoid the put on the shares. At the time the deal was made — before Sept. 11 [2001] — everyone felt the stock would be way, way above the put price. Our wish is that Gucci remains a public company.”

But when PPR decided earlier this year not to renew the employment contracts of De Sole and group creative director Tom Ford, it became clear the French group was willing to buy up to 100 percent of the company’s shares.

Over the last year, PPR has been preparing for its foray into luxury by selling off its traditional business-to-business activities to concentrate on luxury and retail.

Elisabeth Jamieson, European retail research analyst at Lehman Brothers in London, said Thursday’s news would likely have little impact on the stock market.

“For the most part, it’s been priced into PPR’s share price,” she said. “There could be a marginal uptick in the share price but nobody’s going to make a lot of money. There was a question mark, but it was mostly expected.”
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