Reuters : US FTC Preparing to Sue to Block $8.5 Bln Takeover of Capri by Tapestr

US FTC Preparing to Sue to Block $8.5 Bln Takeover of Capri by Tapestry, NYT Dealbook Reports

The US Federal Trade Commission (FTC) is preparing to sue to block Coach parent Tapestry’s $8.5 billion deal to buy Michael Kors owner Capri Holdings, NYT Dealbook reported on Wednesday, citing people familiar with the matter.

The deal, which would bring together top luxury labels such as Tapestry’s Kate Spade, Stuart Weitzman and Capri’s Jimmy Choo and Versace, received regulatory clearance from the European Union and Japan on Monday.

The FTC’s five commissioners are expected to meet this week to discuss the case, a move that could precede a formal vote on whether to file a lawsuit, according to the report.

The merger proposed in August last year aimed to create a US fashion powerhouse amid a gradual slowdown in demand for luxury goods in the US as sticky inflation forces customers to cut back on discretionary spending.

WWD : Goldman Sachs Doubles Down on Luxury Dealmaking

Goldman Sachs Doubles Down on Luxury Dealmaking
Cosmo Roe has been named head of global luxury and beauty in Goldman’s investment banking business, emphasizing the potential for more deals.

Cosmo Roe has a knack for being where the action is and he’s now zeroing in on the well-heeled with a new gig — head of global luxury and beauty in Goldman Sachs’ investment banking business.

As the Goldman investment banker covering consumer technology, he worked on Amazon’s acquisition of Whole Foods, the sale of Reese Witherspoon’s Hello Sunshine to Blackstone and more.

Roe, who joined the banking giant in 2007, has recently nurtured an affinity for beauty, shepherding Tom Ford’s sale to The Estée Lauder Cos., Creed’s sale to Kering, the sales of Charlotte Tilbury, Byredo and Dr. Barbara Sturm to Puig and more.

His work in beauty, and now luxury, is a signal from Goldman that the space is ripe for more dealmaking.

Already, the beauty IPO machine has started back up with Goldman-led offerings from Galderma and Douglas and, soon, Puig.

“It’s very clear to us that public market investors are looking for more opportunities to put capital to work in that sector specifically,” Roe told WWD in an exclusive interview.

While buying into beauty has been a game for the big strategics like Lauder or L’Oréal or deep-pocketed private equity, the IPO market is opening the aperture some and letting more investors get in on the action.

At the same time, beauty dealmaking is changing.

“I don’t think the pace of M&A will slow down particularly, but people are being more selective because to some extent the barriers to entry for new brands have come down a little bit,” Roe said. “When you are executing M&A at this kind of size, you’re looking for brands that have longevity. So people are more selective.”

Meanwhile, the already intertwined worlds of beauty and luxury are also growing closer together, with Lauder’s acquisition of Tom Ford and Kering’s deal for Creed just two prominent examples.

“There’s an opportunity to be more creative with M&A in the space than there has been for a long time,” Roe said. “Just as there is in the beauty market, there’s a lot of private capital looking for a way to play the luxury market right now.”

Roe expects the deal market to outlast a somewhat shaky consumer.

“Although we’re going through a slightly more fragile time in terms of consumer demand, I think the long-term thesis around structural growth in the luxury market [remains intact],” he said.

“It also sets the scene for potentially larger-scale consolidation as people think about how to shift their business exposure and how to play the complicated dynamics between China, Europe and the U.S. from a consumer demand perspective, which I just think makes it a very dynamic market right now,” Roe said.

It doesn’t hurt that the financing market is strengthening as companies get comfortable operating with higher interest rates, making it easier to get deals done.

The challenge in luxury is that so many of the brands have already been scooped up, leaving the dealmaking market to wait on changes at family owned businesses or the evolution of brand portfolios.

Roe declined to discuss specific brands, but no doubt he’s keeping busy.

WWD : Brunello Cucinelli Reports 16.5% Sales Growth in Q1

Brunello Cucinelli Reports 16.5% Sales Growth in Q1
The performance was driven by increases in all the company's markets, and Cucinelli confirmed the forecast of a 10 percent gain in sales in 2024.

MILAN — Brunello Cucinelli continues to fire on all cylinders.

Despite the macroeconomic and social uncertainties and a general slowdown in the luxury fashion segment, Cucinelli‘s namesake company reported a 16.5 percent increase in revenues in the first three months of the year ended March 31. Sales amounted to 309.1 million euros, compared with 265.3 million euros in the same period last year. At constant exchange rates, revenues rose 17.9 percent.

Cucinelli, who holds the role of executive chairman and creative director of the company, attributed the performance to “the value of exclusivity, rarity and creativity in ‘gentle luxury,’ craftsmanship and manual skills.” He has often underscored he prefers “gentle luxury” to the oft-cited “quiet luxury” trend.

Based on the performance of the quarter and the orders for the fall 2024 men’s and women’s collections, Cucinelli confirmed expectations of 10 percent growth in 2024 and “healthy and balanced profits.” The forecast of a 10 percent increase in 2025 sales was also confirmed.

During a call with analysts, he said that operating profits in 2024 are expected to improve by 10 to 20 basis points and that net profit margin is forecast to stand at around 10 percent of sales.

It was noted that the quarter also benefited from last year’s first-quarter basis of comparison, and from the sale of the spring 2024 collection.

“We are very confident that the pursuit of a beautiful, well-made, exclusive and rare product is destined to continue over time, in recognition of the very high value of our manual work and craftsmanship,” said Cucinelli.

“I would like to conclude this document of a financial nature with a brief humanistic note: in these times, and for what seems like an excessively long time, mankind has day after day been astoundingly witnessing a number of unforeseen conflicts between humankind, between sisters and brothers indeed,” he added. “However, I am certain that common sense and universal harmony will return to guide the actions of those who are responsible for achieving a common destiny potentially rich in joy. Inspired by my master Pythagoras, my wish is that Creation will help this awakening in every part of the world.”

In the quarter, sales in Europe, including Italy, rose 13.9 percent to 108.8 million euros, representing 35.2 percent of the total, driven by a more diversified cluster of tourists, compared to a predominantly American one in the previous quarters.

In the quarter, sales in Italy climbed 26.8 percent to 35 million euros, accounting for 11.3 percent of the total. During the quarter a new flagship was opened in Rome in the luxury shopping street Via dei Condotti and a boutique in the tony Tuscan resort Forte dei Marmi.

Sales in the Americas amounted to 114.2 million euros, up 19.5 percent on last year, representing 36.9 percent of the total, boosted by the appetite of local shoppers.

Revenues in Asia grew 15 percent to 86.1 million euros, accounting for 27.9 percent of the total. Cucinelli touted the potential of the area, whose performance in the quarter was lifted by growth in China, Japan, South Korea and the Middle East.

Retail sales rose 15 percent to 188.6 million euros, representing 61 percent of the total.

As of March 31, the number of directly operated stores amounted to 125, unchanged as of the end of December last year.

The wholesale channel registered sales of 120.5 million euros, up 19 percent on last year, and accounting for 39 percent of the total.

In March, the brand unveiled its first eyewear collections with EssilorLuxottica under a 10-year license.

The Information : If Salesforce is a Buyer Again, the M&A Market Must Be (Almost

If Salesforce is a Buyer Again, the M&A Market Must Be (Almost) Back

A year ago, the board of Salesforce, one of the most acquisitive companies in tech, disbanded its mergers and acquisitions committee as it faced pressure from activist shareholders to reduce spending. The economic backdrop had sent deal-hunters into hiding. Forecasters braced for a global recession. Investment bankers complained they had nothing to do.

But in recent days there’s been signs that the deal market is beginning to turn. News last week that Salesforce was in talks to buy data management software firm Informatica, valued at $10 billion, was perhaps the best example that corporate buyers are hungry again. Not only have stocks rebounded, satiating activists and other shareholders, but large companies (“strategic buyers,” in M&A parlance) are feeling more confident. Forecasters say the odds of a recession are at their lowest point in a couple years. Meanwhile, first quarter results from banks in recent days showed investment banking revenues are starting to recover from the downturn—for more, see below.

Anton Levy, managing director at the growth equity giant General Atlantic, said at The Information’s Private Capital Conference last week that the change in economic sentiment meant that more tech executives would seek to make large deals. “To have the confidence to do a meaningful acquisition for you, whatever that means for as a CEO, you need to be able to predict the near future,” said Levy, a board member at Squarespace, Vox Media and Chess.com.

Now, he said, CEOs “have a sense of resilience. That creates an environment where you’re going to see M&A pick up.”

Another environmental factor is that sales growth is the prize again. As RBC Capital Markets said in a note sent to clients, revenue growth has been more important than free cash flow margins or gross margins in driving tech valuations up recently.

Companies may not be able to rely on price increases or new products to drive revenue growth, a reality that could send them to an M&A market to satisfy shareholder desires. “This is a moment when most want to purify their business model or grow,” Morgan Stanley chief executive Ted Pick said on the investment bank’s earnings call Tuesday. He added: “It is not surprising that the C-suite wants to act. So I think we are in the early innings of a multiyear M&A supercycle.”

That might be part of the motivation for executives at Salesforce. While its acquisition pause since mid-2021 has helped lift its profit margin to 14.4% in the 12 months to January from around 2% in fiscal 2021 and fiscal 2022, its revenue growth has slowed from around 25% in fiscal 2022 to a projected 9% this fiscal year.

Meanwhile, potential sellers may have finally settled on the fact that they’re no longer worth what they were when interest rates were zero. We reported in January that privately held Israeli cybersecurity startup Noname Security, valued at $1 billion valuation in 2021, was looking to raise money at a lower valuation. It appears to have settled on M&A instead. TechCrunch reported last week that it was in talks to sell to Akamai Technologies for $500 million.

For startups, “there’s a moment in the market right now to be acquired,” Ronan Kennedy, an M&A specialist at the VC firm B Capital, told me. VC firms are looking to combine companies in the same sector, and public companies talk more on earnings calls about making acquisitions, he said. The deals, however, won’t necessarily be at “the valuations we saw in the past,” he said, “but the true business valuations.”

Plenty of factors, of course, work against increased deal-making. One obvious question is the more aggressive antitrust enforcement in the U.S. and Europe, which has put a chill on many internet and semiconductor deals. The other less satisfying one: Are all the companies up for sale worth buying?

Maybe not, said Tony Kim, BlackRock’s managing director of fundamental equities, at our conference last week. For private equity firms that have bought “old, legacy” software companies, “do the strategics want that? Do they actually want to buy that?” he asked, rhetorically. “Especially now in AI, like I'm buying a legacy stack of application software, but like, ‘Hey, the world's going over here.’ It's a very different world.”

Banking’s AI Opportunity
Artificial Intelligence is a growth driver for the banking industry, according to Goldman Sachs CEO David Solomon, who told investors on Monday that AI comes up in “virtually every client conversation I have” and that the expected “demand for AI-related infrastructure” and power will be a “tailwind” for Goldman’s financing and trading businesses.

What Q1 Earnings Reports Are Telling Us
Business is recovering, although we’re a long way short of the halcyon days of 2021.

Goldman Sachs’ investment banking division reported 32% higher fees of $2.08 billion, driven by growth in debt underwriting, advisory work (due to an increase in completed M&A) and from equity underwriting thanks to IPOs and secondary offerings.

“It's clear that we're in the early stages of a reopening of the capital markets,” Solomon said on the call. To put Goldman’s results into context, here’s a chart showing its IB revenues in Q1 going back to 2021:
Meanwhile, JPMorgan investment banking revenue rose 27% to $2 billion on stronger debt and equity underwriting, but M&A advisory fees fell. “We’re seeing better IPO performance,” said JPMorgan CFO Jeremy Barnum on a call with analysts. He noted though that the first quarter reflected “pull-forward,” particularly on debt refinancing, implying the growth rate could slow.

Meanwhile, “regulatory headwinds” are having “a chilling effect” on M&A, Barnum added.

Morgan Stanley was a laggard. Its investment banking revenues rose 16%, the bank reported on Tuesday, lifted by a significant increase in equity underwriting but dampened by a drop in advisory revenue “on lower completed M&A transactions.”

Bank of America’s investment banking fees rose 35% to $1.6 billion, which CEO Brian Moynihan attributed in part to BofA increasing its market share and to efforts it has made to expand in the middle tier of the market.

Heard at The Information’s Private Capital Conference
Speakers at our conference last week made clear regulatory pressures are having an impact on M&A. But that’s not stopping something of a recovery.
  • “It seems that now no one's able to buy anyone,” Coatue’s chief investment officer Philippe Laffont. “There's regulatory waves… I actually think it's bad because a lack of M&A can favor large companies…. It's the opposite of what you think. When there's no M&A, then the path for small companies to be successful is really hard. And that means that the large companies are less challenged by the small ones.”
  • General Atlantic’s co-president Anton Levy: “I think it's getting a little bit better. The M&A environment today is better than last year. [But] There's a handful of companies that are under a lot of scrutiny. They're gonna continue to have their hands tied.”
  • Josh Wolfe, co founder and managing partner of Lux Capital: “M&A is still open. We sold the company Mosaic to Databricks last year. And I think like in certain pockets, particularly where you have sort of [an] oligopolistic industry structure with 2, 3, 4 players that might covet a particular team or technology that you can still exit.”
  • On IPOs, Michael Harris, vice president of Global Capital Markets at the NYSE Group: “If you look at the total ECM [equity capital markets] pool—converts, follow-ons and also IPOs—you're seeing activity that's up about roughly 300% relative to last year. So things are steadily improving. We're not back to 20 20, 20, 21 days, but, things are definitely on the right path.”

>>> Arm Holdings plc down hard, diving below its 50-day moving average; stock ha

Arm Holdings plc down hard, diving below its 50-day moving average; stock has held up well and was higher by over 60% on year-to-date basis prior to today, but ASML's weak Q1 bookings and revenue guidance is weighing on semiconductor space (107.19 -15.03)
  • With a P/S north of 42x, Arm Holdings (ARM) was especially vulnerable to a pullback. Semicap company ASML's net bookings of €3.6 bln dropped by 5.3% yr/yr, creating concerns that demand in the semiconductor industry isn't as robust as previously believed.

FT Lex : A Royal Mail bid will only deliver controversy

A Royal Mail bid will only deliver controversy
Stock reflects the burden that an obligation to deliver letters six days a week has become

Daniel Křetínský’s reputation for mystery suggests he is difficult to understand. The Czech billionaire’s investment approach seems pretty straightforward: target very well-known, very underperforming companies.

Royal Mail owner International Distributions Services, which the “Czech Sphinx” has approached with a takeover offer, certainly ticks the boxes. IDS shares jumped on Wednesday. Still trading almost a quarter below their 2013 privatisation price, the stock reflects the burden that an obligation to deliver letters six days a week has become.

For shareholders, including Křetínský who owns 27 per cent, much rests on the outcome of a plea to regulator Ofcom to lessen the universal service obligation, getting costs down and profits up. Even so, the benefits would not be immediate. For Křetínský, whose approach was rejected, unlocking value would surely require more radical surgery, breaking off the group’s international delivery business GLS.


That prospect would bring with it labour angst and political controversy, for a company whose initial public offering prompted a review of why it was sold so cheaply. Not any more. The business looks unsustainable in its current form, with letter volumes down to 7bn a year from its 20bn peak two decades ago. Suggested changes to its service obligations, such as a move to five-day or three-day per week deliveries, could save Royal Mail between £100mn-£200mn and £400mn-£650mn a year. None have proved acceptable to regulators.

The latest (perhaps more palatable) tweak being proposed is to move second-class deliveries to just three days a week and slow delivery of bulk business mail. IDS thinks this might reduce costs by £300mn a year. The figure is broadly in line with the operating loss that analysts expect at Royal Mail in the 12 months to March this year. Those losses were already expected to move to break-even over the following year.

Meanwhile, international delivery division GLS is expected to make £350mn in operating profits next fiscal year. That unit makes similar operating margins to Deutsche Post DHL. But at 9 times forward earnings, IDS as a whole trades at a 30 per cent discount. Even after the jump on Wednesday, valuing GLS in line with rivals would suggest a sale price of £400mn over the market value of the entire IDS business.

That still only implies a price of 300p a share — below the 330p IPO price and a sum that would in effect involve getting Royal Mail for free. The UK government in 2022 called off a national security probe into Křetínský’s stake building. This time it might want to send a different message.