Moncler SpA agreed to buy Stone Island, a rival maker of high-end sportswear, for 1.15 billion euros ($1.4 billion) in cash and shares, investing in a new platform for growth as the pandemic erodes demand for luxury.
Moncler said Monday it will purchase 70% of Stone Island’s parent company SPW from Chief Executive Officer Carlo Rivetti and other members of his family. The skiwear maker will then buy the remaining 30% from Singapore’s state investor Temasek. Moncler shares rose as much as 6.5%.
With Stone Island, Moncler is diversifying with a more technical brand after a streak of double-digit sales growth ended. The purchase also gives the Italian company, known for expensive winter jackets, a bigger presence in its home territory and a sportswear brand that appeals to younger customers after a takeover approach by French fashion company Kering SA last year.
The brand, founded in 1982, is known for colorful edgy sport jackets, which can cost more than $1,000. It also specializes in high-tech fabrics and has made garments that change colors depending on temperature.
Most European countries besides Switzerland have ordered ski resorts to shut down, undercutting one of the markets Moncler depends on. Chairman Remo Ruffini, 59, said that while the deal comes at a challenging moment, he sees potential in expanding Stone Island’s reach.
“I can see Stone Island growing in essential markets, such as Asia and the Americas, still unexplored by them, which we know well,” he said on a conference call. “It is precisely in these moments that we need new energy and new inspiration to build our tomorrow.”
Covid-19 has accelerated the luxury industry’s dependence on e-commerce and underlines the importance of younger shoppers from Generation Z, who were first to return to stores after lockdowns, Bain & Co. said in a report last month.
The deal values Stone Island at 16.6 times 2020 expected earnings before interest, taxes, depreciation and amortization of 68 million euros. The Rivetti family plans to reinvest part of the proceeds to become a shareholder in Moncler.
The deal is the latest in the luxury industry this year after LVMH salvaged plans to buy Tiffany & Co. in a record $16 billion acquisition. Luxury-goods makers are betting that demand for high-end products will rebound as consumers cut back on travel spending during the pandemic.
Moncler may be able to help Stone Island improve its distribution. The acquirer gets 77% of its revenue through its own network of 218 stores, while Stone Island only has 24 shops and gets three-quarters of sales from wholesale partners.
Moncler and Stone Island have benefited from growing demand for so-called athleisure wear, which may be accentuated by the switch to working from home. McKinsey and Business of Fashion forecast a strong market for the segment in 2021 in a report published last week.
Citigroup and Cornelli Gabelli advised Moncler, while Rothschild advised Stone Island.
