(News Bulletin 247) – The owner of the Gucci or Saint Laurent brands announced Monday evening the takeover of this Anglo-French house founded in 1760, allowing it to accelerate in the very strategic and promising market of high perfumery.

Kering clearly displays its ambitions in the very lucrative and buoyant market of high perfumery. The owner of the Gucci, Saint Laurent and Bottega Veneta brands announced on Monday evening that he had taken control of Creed, an Anglo-French house of high perfumery founded in 1760 by James Henry Creed. She is particularly known for her fragrance Aventus, created for the 250th anniversary of the house of Creed.

The acquisition of Creed is an important building block of the new Kering Beauty division, launched last February by the French luxury giant and led by a former executive from Estée Lauder, the American cosmetics giant. It allows Kering Beauté “to acquire a critical size with a view to its future growth, in a strategic market segment”, explains Kering.

Creed’s revenue last year exceeded 250 million euros in 2023, representing 1.23% of Kering’s total revenue of 20.35 billion euros. in 2022.

A price commensurate with the quality of this asset

This purchase, the amount of which has not been disclosed, was made with funds controlled by BlackRock long term private capital Europe and Javier Ferrán, current president of the company. The cash transaction is expected to close in the second half, reports Kering.

Regarding the price of this acquisition, Royal Bank of Canada (RBC) attributes to Creed an enterprise value between 1 and 2 billion euros, “and more likely at the high end of this range”. To formulate this estimate, the research office relied on the multiples of recent comparable transactions in the beauty sector, which “are 4 times the enterprise value compared to turnover and 20 times the enterprise value in relation to the gross operating surplus” like the acquisition of Aesop by L’Oréal, carried out last April.

Quoted by AFP, the financial director of Kering, Jean-Marc Duplaix, declared that Kering had paid “a price which is commensurate with the quality of this absolutely unique asset”, deeming it “consistent” with those practiced ” in the past, in that segment”.

Growth opportunities in Asia-Pacific

Creed has indeed “experienced strong double-digit growth in recent years”, recalls RBC.

For her part, Raffaella Cornaggia, director of Kering Beauty, quoted by AFP, praised the quality of Creed’s growth model, with “rates [….] double digits and high margins”, while “preserving the very high quality of its products and its image”. She also welcomed the “very solid long-term growth prospects” of Creed, during a conference call .

For RBC, the addition of Creed to the scope of Kering Beauty accelerates Kering’s ambition “to internalize its beauty activities, which management confirms by starting with Bottega Veneta, Balenciaga, Alexander McQueen, Pomellato and Qeelin”.

Kering will also be a valuable support for this house of high perfumery, with a view to capturing “growth opportunities in the expansion of stores, in particular in China and in the APAC (Asia-Pacific) region, as well as in the development of its women’s activity and its online distribution”, adds the research department.

The announcement of this takeover is appreciated by the market, because it could revitalize a group whose performance emerged mixed at the end of its first quarter.

The day before, several design offices had slashed their price targets on the French luxury giant like Stifel, which had reduced its target price from 645 to 630 euros, while remaining on the “purchase”. The latter had justified this adjustment by a downward revision of the growth assumptions for the second quarter of 2023 for Gucci, due, in particular, to a slower recovery in sales than previously modeled in China.

For its part, Oddo BHF “neutral” on the file, had made a similar adjustment, lowering its target price from 506 to 498 euros. The design office anticipates for its part “a modest acceleration of growth” in the second quarter.

On the Paris Stock Exchange, Kering rose 1.4% after gaining more than 2.5% in early trading on Tuesday.