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Shares in British luxury retailer Burberry have jumped this morning on rumours that the fashion house could be a takeover target for Italian outerwear brand Moncler.
Burberry’s share price rose more than seven per cent in early trades, before paring back gains to just over four per cent.
Specialist fashion site Miss Tweed reported that LVMH head Bernard Arnault is “keen” to get a deal done with the British retailer, citing several industry sources.
LVMH had purchased a 10 per cent stake in Double R, the investment vehicle controlled by Moncler CEO Remo Ruffini’s Ruffini Partecipazioni Holding, in September this year.
Double R currently has a 15.8 per cent stake in Moncler, and the deal gave LVMH a seat on the Italian company’s board.
Why is Burberry a takeover target?
City analysts warned that Burberry could be a takeover target earlier this year, after its share price plummeted.
Burberry was the worst performer on the FTSE 100 this year and dropped out of the index in September due to its low valuation.
A combination of uncertain aesthetic direction, weak demand for luxury goods and an unexpected CEO change have worried investors.
Abrdn investment manager Sasha Kachanova told The Telegraph: “Burberry remains a potential takeover target, particularly at its current valuation.”
“As the sole British brand of scale operating independently – a rarity in the luxury industry – it boasts a rich heritage and the opportunity to enhance its iconic product lines and accessories.”
Burberry is also likely to benefit from the announcement of a stimulus package by the Chine Government. Weak demand from Chinese consumers for high-end goods has been a key driver of decline in the international luxury goods.
Burberry’s share price has risen by just over a third in the last month.
A spokesperson for Moncler said the company “does not comment on unsubstantiated rumors.”
Burberry similarly declined to comment.
Takeover could be a ‘game-changer’ for Burberry
Analysts have reacted positively to the rumours.
“Moncler would be securing a promising deal with significant upside,” Jelena Sokolova, Senior Equity Analyst at Morningstar said.
“Burberry’s new strategic focus on iconic products like outerwear and scarves is commendable and the company is getting more pragmatic in terms of pricing – something they’ve been doing for the past few months,” she added.
She added that Burberry has been struggling with its sales of outerwear, with competition from both Moncler and Barbour.
In this area, Sokolova said, input from Moncler could be a “game-changer” for Burberry, “steering the brand back to its core strengths”.
However, Italian broker Intermonte told Reuters a possible deal between the two luxury groups is an “unlikely scenario”, as Moncler would see the relaunch of such a large company as Burberry as risky.