Kering leads race to acquire Italian eyewear maker Marcolin
Gucci owner Kering has emerged as a strong bidder for Marcolin in a deal that could value the Italian eyewear maker at up to €1.3 billion, several sources with first-hand knowledge of the matter have said. The potential transaction marks a return of M&A in the luxury industry as interest rates are set to drop in key markets such as the United States and access to cash becomes easier.
Other bidders include industry giant EssilorLuxottica, Safilo and Marchon, a major U.S. eyewear producer that belongs to the optical insurance company VSP Vision. It’s possible that Kering is working with Marchon. “I know that Kering is talking to Marchon,” one senior industry source said. Kering may be interested in selling Marchon the licenses held by Marcolin with mass-market brands it does not want keep.
If Kering succeeded in acquiring Marcolin it would be a great win for the French group, which is in need of positive news flow after posting the worst results in the industry for a group of this size last month. The underperformance of Gucci, Saint Laurent and Balenciaga, compared to their peers, led investors to wonder whether the group had the right strategy and management in place, as Miss Tweed reported.
Kering Eyewear is the group’s only business that is growing and its main success story right now. Launched in 2014, the unit has been built up through acquisitions. Kering Eyewear snapped up Denmark’s Lindberg in September 2021 and Hawaii’s Maui Jim in March 2022. Now it’s eyeing Marcolin.
Eyewear is one of the fastest growing product categories in the so-called “accessible luxury” space. Sunglasses and regular spectacles, together with perfume, scarves and small leather goods, allow aspiring customers to wear a prestigious luxury brand without having to part ways with several thousand euros.
In 2023, the revenue of every major Kering fashion brand declined but sales from the group’s eyewear unit rose 10 percent on a comparable basis, reaching a record €1.5 billion. Kering has said in the past that it aimed to grow eyewear revenue to €2 billion. If it bought Marcolin, it would reach that target immediately.
MARCOLIN
Marcolin has not yet published results for 2023. In 2022, it generated net sales of €547.4 million, and in the nine months to Oct. 31, sales reached €421.6, up 3 percent against the same period in 2022. The company employs around 2,000 staff.
Marcolin’s controlling shareholder, the private equity firm PAI Partners, has retained Goldman Sachs as advisers for the sale of their stake, which is understood to be around 80 percent. Marcolin and PAI would not confirm the size of the holding. Kering and PAI declined to comment.
“There are only strategic bidders interested in Marcolin,” one person with knowledge of the talks said. The source said that due diligence had already been conducted and that indicative bids had had to be sent to PAI Partners by the end of February.
Kering arch-rival LVMH is not very interested in Marcolin, several industry sources said. The owner of Dior and Louis Vuitton harbors big ambitions in eyewear but it has enough production capacity with its brand-new state-of-the-art plant Thélios. Also, last year it acquired an eyewear factory from rival Safilo,located in Longarone in the province of Belluno, north of Venice, where today most eyewear producers are located.
In 2021, LVMH bought back the 49 percent stake it owned in the Thélios joint venture it had formed with Marcolin in 2017. Built from scratch and inaugurated in 2018, Thélios is based in the Italian eyewear cluster of Belluno.
In September 2023, Thélios acquired French high-end sunglass brand Vuarnet from NEO Investment Partners without disclosing any financial details. It marked the first acquisition for Thélios, which designs, produces and distributes sunglasses and optical frames for many of the group’s brands including as Dior, Fendi and Givenchy. Thélios took back the Dior and Fendi licenses from Safilo a few years ago to better control the brands’ image in eyewear.
Safilo has held informal merger talks with Marcolin many times in recent years, but a deal never materialized. Safilo makes eyewear for brands whose appeal has waned. These include Kate Spade, Tommy Hilfiger and Fossil. It’s not surprising that in 2023, Safilo’s net sales were down 2.4 percent at €1.02 billion. That’s also why the company is keen to acquire Marcolin.
MARCHON
Marchon is a sturdy rival. Like Safilo, Marchon generates around $1 billion in annual turnover. Marchon has a production unit in Puos d’Alpago, in Italy’s eyewear making cluster of Belluno, and a global network of distributors. The U.S. eyewear company works with brands such as Calvin Klein, Lacoste, Paul Smith and Ferragamo.
“Marchon is not to be discounted even though it may difficult for it to compete against Kering,” one source with knowledge of the talks said. But three other sources said that Kering was talking to Marchon about the possibility of doing a deal together and would let Marchon acquire the licenses Kering does not want keep. “It’s not obvious to obtain the approval from other smaller licenses to move from Marcolin to Marchon,” a senior industry source said.
The sale of Tom Ford in 2022 to the Estée Lauder Companies torpedoed Marchon’s acquisition of Marcolin at the last minute, as Miss Tweed was first to report.Tom Ford, the high-end brand started up by the eponymous designer turned filmmaker, represents more than 50 percent of Marcolin’s revenue. Tom Ford is one of the world’s biggest eyewear lines for men. It would nicely complement Kering’s portfolio, which is predominantly for women with brands such as Gucci, Balenciaga, Saint Laurent and Bottega Veneta.
Unlike Marcolin, LVHM’s Thélios and industry giant Luxottica, Kering does not have one main production center but a central logistics hub in Italy that has been operational since 2019. Kering also owns a majority stake in Italian eyewear manufacturer Trenti and works with more than 40 different external manufacturing partners, mainly in Europe.
Kering launched an eyewear joint-venture with Richemont group in 2017. It started with Cartier and now works with several other Richemont brands such as Chloé, Dunhill and Montblanc. Kering produces Cartier eyewear at the Manufacture Kering Eyewear in Sucy-en-Brie, not far from Paris and Orly airport.
A year ago, Kering acquired the French eyewear maker UNT (Usinage & Nouvelles Technologies), a key player in the manufacturing of high-precision metal and mechanical components located in the Upper Jura, France’s historical hub for eyewear and micro-technical production.
LICENSE AGREEMENTS
In license agreements, it is customary to include a provision stating that a change of ownership of the licensee allows a contract to be ended. It is not clear what will happen to Marcolin’s licenses if Kering or another competitor buys the company. In the past six months,Marcolin has renewed a number of licenses up to the end of 2030, including that of Zegna. Any change to Marcolin’s ownership would allow Zegna to renegotiate its license or to terminate it, but there would be a notice period, a source close to the company said.
The one license that is secure is Marcolin’s Tom Ford license, its main asset. At the end of 2022, Marcolin paid a whopping $250 million to The Estée Lauder Companies, the new owners of the Tom Ford brand, to secure the perpetual license for the Tom Ford brand. The deal was funded by a combination of cash and a capital increase by PAI Partners of $50 million.
It’s possible that if Kering acquires Marcolin, it would been keen to let go of many of the licenses that Marcolin has with brands that are too mass-market for the luxury group. These include Kenneth Cole, Adidas, Skechers and Timberland. The Marcolin licenses Kering would likely be interested in are Tom Ford,Zegna, Tod’s and Christian Louboutin, which the Italian company signed last month. Marcolin also has a license to produce eyewear for Pucci, which belongs to LVMH, until the end of 2030.
Zegna’s Thom Browne menswear fashion brand bought back the eyewear license over a year ago. Its eyewear business and production are now handled internally.
Marcolin last year acquired IC! Berlin, a small independent eyewear manufacturer which employs 140 people and was founded in Berlin in 1996. Financial terms were not disclosed. Marcolin also owns the brand Web Eyewear.
In 2023, recurring operating income generated by Kering Eyewear rose to €276 million from €203 million in 2022, “reflecting Maui Jim’s contribution and the Eyewear division’s newly acquired scale,” the group said. Taking into account Kering Beauté and corporate costs, the “Kering Eyewear & Corporate segment” posted a recurring operating loss of €7 million for 2023, an improvement from the loss of €88 million in 2022. The figure is revealing of the size of the investments Kering has made to build up its beauty unit and the group’s “corporate” expenses.
Should Kering buy Marcolin, its net debt would likely rise. The group’s net debt stood at €8.5 billion at the end of 2023, up from €2.3 billion at the end of 2022. The increase was partly due to the €3.8 billion bond Kering issued in August 2023 to help finance its €3.5 billion acquisition of the French fragrance label Creed, one of the most expensive deals in perfume in recent history. The group said: “Creed’s high level of profitability offset start-up costs at Kering Beauté.”
Another brand that could come on the market soon but is much smaller is Britain’s Linda Farrow, according to boss Simon Jablon. Founded in 1970 by designer Linda Farrow, it is now run by her son Jablon. The upmarket British eyewear brand is profitable and makes £10-15 million in annual sales. Last month, it unveiled a collection for French brand Jacquemus.
Linda Farrow has done collaborations with fashion brands such as Y/project and Dries Van Noten. After being hit hard by the pandemic, Jablon took Linda Farrow off the market, refusing offers it considered too low. As business rebounded, Jablon told Miss Tweed in 2022 that he was not actively looking for external investors, but was not closed to the idea.