PPR, the French retailer and luxury goods giant is still in the process of reorganizing its portfolio of brands. Their focus is on sports and lifestyle brands and after gaining control of Puma their next target is surfing inspired clothing firm Volcom. They announced on Monday that they would be making an offer to acquire all outstanding Volcom shares for $24.50 a share, making the acquisition a $607.5 million deal. PPR is sitting on a war chest of 2.4 billion euros that accrued to them from the sale of African distribution business CFAO and French furniture retailer Conforama.
Francois-Henri Pinault, the Chief Executive of PPR wants to utilize the fund primarily for acquisitions that fit in with its existing portfolio. PPR already owns fashion houses like Gucci, Balenciaga and Alexander McQueen, whose creative director Sarah Burton designed the wedding dress for Kate Middleton who is now known as the Duchess of Cambridge after the Royal Wedding. PPR is also looking for buyers for its catalog business Redcats and books and electronics retailer FNAC whose first-quarter sales disappointed investors. Volcom which was founded in 1991 was described by Pinault as one of the most desirable global action sports brands and they hope to take it forward aggressively.
Volcom has 13 stores in the United States that sells its T-shirts, hooded sweatshirts and other clothes. The company made a net profit of $22.3 million on revenue up 14 percent at $323.2 million, last year. They have been struggling with the rising costs of raw materials that is eating into their margins. PPR aims to take Volcom’s operating margin above the peak of 19% that they hit in 2007. Their margins last year was languishing around 9%. The experts also believe that PPR can give Volcom a strong sourcing and distribution infrastructure – two key areas that have contributed to its poor recent performance.