In what might be the biggest coming together of two of the most iconic brands in fashion in recent times, U.S.lifestyle retailer Michael Kors is set to acquire Jimmy Choo for USD 1.2 billion. Jimmy Choo has been, since its inception, one of the most famous names in the fashion world, designing shoes that have graced the feet of socialites and celebrities alike.
Jimmy Choo was founded in the early 1990s as a made to order luxury shoe maker for ladies in London. In 1996, the bespoke Malaysian- British shoemaker founded his iconic label with the help of his niece. Since then, his designs have been the mainstay in the world of high fashion. Currently, Jimmy Choo has about 150 retail stores all over the world.
Jimmy Choo, as a brand, has been performing consistently, with its shares rising steadily on the New York stock exchange. In contrast, Michael Kors has been facing the weather, with a steady drop in stock prices and a loss in its market value to the tune of 65%, triggered mostly by new entrants in the luxury handbags and accessories segments accompanied bya reduction in footfall in its retail outlets.
According to Michael Kors CEO John Idol, Jimmy Choo has the potential of making $1 Bn. in sales annually as it gears up to open more stores in emerging markets, especially China. However, the pace of the proposed expansion will be on a controlled basis. The acquisition of Jimmy Choo will lead to an increase of their footwear portfolio to 17% of their total sales mix, from the current 11%.
Experts say that one of the reasons for the falling demand for Michael Kors was the pace of its expansion, leading to a dilution of its brand value. Michael Kors had tried to grab a larger portion of the market share by opening its own dresses and menswear lines for sale online. Consequently, sales at stores had fallen by about 14% in the fourth fiscal.
The terms of the sale include Jimmy Choo shareholders getting 230 pence per share, garnering an enterprise value of about USD 1.35 billion. Jimmy Choo’s shareholders shall be given a 36.5% premium on the closing stock price before the company was put up for sale.
According to a statement released by Michael Kors, CCO and Honorary Chairman of Michael Kors, “Jimmy Choo is a premier fashion luxury house that offers distinctive footwear, handbags and other accessories. We admire the glamorous style and trendsetting nature of Jimmy Choo designs. We look forward to welcoming Jimmy Choo to our luxury group.”