Shares of Richemont, the parent company of luxury brand Cartier, saw a significant increase after reports emerged that the company had turned down a merger proposal from French luxury goods group Kering earlier this year. French fashion publication Miss Tweed revealed that François-Henri Pinault, CEO of Kering, approached Johann Rupert, chairman and controlling shareholder of Richemont, with a merger proposal involving both cash and shares. However, Rupert, who had previously stated that he had no intention of selling the company, found the terms unsatisfactory and did not bring them to the attention of Richemont’s board.

Speculation of a possible merger between Richemont and Kering has been circulating for a while, but gained even more traction recently following LVMH’s acquisition of American jeweler Tiffany. This acquisition put pressure on competitors to look for growth opportunities. Both Kering and Richemont declined to comment on the report. Kering, known for brands like Bottega Veneta and Yves Saint Laurent, has a strong presence in the fashion and leather goods industry. On the other hand, Richemont is renowned for its watch and jewelry brands such as Van Cleef & Arpels and Jaeger-LeCoultre. While a merger between the two companies would make strategic sense, the complex family ownership structures present significant obstacles. Kering currently has a market capitalization of €74 billion ($88 billion), while Richemont’s market capitalization stands at CHF 47 billion ($50.8 billion). Rupert’s family investment vehicle owns 10% of Richemont’s equity and has 51% of voting rights due to a dual share scheme. In contrast, Artemis, the holding company controlled by the Pinault family, owns 41% of Kering.

Following the news, Richemont’s shares rose by 3.8% on the Swiss stock market, while Kering’s shares dropped by 1.4%. UBS, a financial services firm, commented that a merger between the two companies would create a luxury powerhouse capable of challenging LVMH’s dominance in the market. UBS believes that combining the iconic brands Gucci and Cartier could address concerns about Kering’s fashion risks and the mismanagement of some smaller brands in Richemont’s portfolio.

In the luxury sector, there is growing anticipation regarding the potential merger between Richemont and Kering. Industry insiders closely monitor any developments as this merger could potentially become the largest deal ever in the luxury industry.

Useful links:
Forbes: A Merger Between Richemont and Kering Could Challenge LVMH, But the Obstacles Are Enormous
Vogue Business: Report speculates on Richemont-Kering merger amid wider luxury M&A frenzy