TheChek News Flow

• The firm has been closely watched by the fashion industry since its formation in 2016, but its scope is much bigger than clothing. It describes itself as "a leading global consumer-focused investment firm."
• L Catterton has what it describes as a "special relationship" with LVMH and the Arnault family that entails sharing insights and investment opportunities.
• Its strategy centres on identifying broad consumer trends, rather than focusing on specific sectors.

When Birkenstock makes its public-market debut as soon as this month, it won’t just be a win for the nearly 250-year-old sandal maker.

It will also be a victory for its owner, L Catterton, which looks all but certain to make a sizable profit, having purchased the company in 2021 for around €4 billion (about $4.9 billion at the time). The brand is now reportedly seeking a valuation of $8 billion.

The private-equity firm has been closely watched by the fashion industry since its formation in 2016, when LVMH and Groupe Arnault — the family holding company of LVMH-owner Bernard Arnault — joined forces with the private-equity firm Catterton, founded in 1989. (Groupe Arnault now goes by the name Financière Agache.) Today, L Catterton is the majority owner of a number of well-known brands, such as Ganni, Etro and APC. It also backs companies through venture and minority investments, among them Savage x Fenty, Everlane, Giuseppe Zanotti, ThirdLove and Function of Beauty.

The close ties to LVMH and Arnault, who regularly vies for the title of “world’s richest person,” help lend the fashion brands in the firm’s portfolio an aura of prestige. Lately, it has also been successfully ushering companies to public listings at a time when the IPO market is still exiting a deep freeze.

Aside from Birkenstock, in July, the firm saw the public listing of another of its companies, Oddity Tech, owner of beauty brands such as Il Makiage and SpoiledChild. After the IPO, it boasted to its fund investors that its roughly $50 million investment in Oddity was worth in the vicinity of $900 million by the close of the first trading day, according to a document seen by the Wall Street Journal. (The stock has since dropped by about one-third.)

“They have, just anecdotally, done very well within the consumer space,” said Jinny Choi, a private equity analyst at PitchBook. “The fact that they’re coming out with a new IPO in this market speaks to that level of expertise.”

The firm’s scope is broader than just fashion and beauty. L Catterton backs a sprawling array of companies globally and across sectors. It owns pet food makers, dental care providers and food-service businesses. It has its hands in private credit and real estate, too, with investments in the Miami Design District and the Brentwood area of Vancouver.

Just how big is L Catterton?

With about $35 billion of equity capital under management, L Catterton is “on the bigger side” in the private equity arena, according to Choi. It maintains 17 offices around the world and often describes itself as “a leading global consumer-focused investment firm.”

The world’s PE mega-giants are still much larger. Blackstone, for instance, recently reached a record $1 trillion in assets under management.

But among firms focused on the middle market of consumer companies — those with revenues generally between $10 million and $1 billion — it’s a heavyweight. Thompson Street Capital Partners, which plays in some of the same areas as L Catterton, has $4.5 billion under management as of this writing. Nexus Capital Management has around $2.4 billion under management.

What is L Catterton’s ownership structure and relationship to LVMH?

One question always surrounding the firm is just how involved LVMH and the Arnault family are in L Catterton’s decision-making.

The two parties each own about 20 percent of the firm. In March, L Catterton received a minority investment from Hunter Point Capital, which now owns just under 10 percent, while the firm’s 60 partners retain the controlling stake of just over 50 percent.

L Catterton and LVMH have what the firm describes as a “special relationship” that entails “actively collaborating in areas such as consumer insights, brand strategies, retail expansion and economies of scale across the collective portfolio.” It allows L Catterton access to LVMH’s knowledge and expertise when it’s relevant. If L Catterton were evaluating a beauty company, it could hypothetically ask Sephora what it is seeing.

Scott Dahnke, co-chief executive of L Catterton, said in an interview that LVMH and the Arnault family share in the firm’s economic success, but they invest as limited partners with no special financial terms. They also introduce L Catterton to investment opportunities that might be attractive for the firm but don’t fit their business strategy. Birkenstock would be an example.

Wait, do they really own a pet food company?

Yes, a few in fact. Among those in its portfolio are Canidae, JustFoodforDogs and a third, I and Love and You.

To understand its range of investments, it helps to recall how the firm came into being. LVMH and the Arnaults began their relationship with Catterton, as it was then still known, in 1998 when they invested with the fund. LVMH would go on to launch its own private equity fund, L Capital, in 2001 as it sought investment opportunities in Europe that didn’t fit under the LVMH umbrella. It expanded into Asia as well in 2008. Catterton, meanwhile, was growing and reaching from the US and Canada into Latin America. The different entities joined forces in 2016 to create a firm that would cover much of the globe.

Catterton, however, was never focused specifically on fashion, and today, L Catterton isn’t either. The firm backs companies in industries from pet food and pet health to human health and human food. For example, it’s the majority owner of Bartaco and the Mexican chain Uncle Julio’s, and it’s a minority investor in Velvet Taco. (Clearly, they like tacos at L Catterton.) Other investment areas include technology, wellness and more. It has relationships with other strategic investors it can rely on for insight in these spaces.

Choi said the wide range “makes sense for their fund size.” She wasn’t surprised to see the firm investing outside the traditional consumer arena, too, in sectors such as health care and technology.

Less typical, she noted, is L Catterton’s exposure within the venture space. It currently lists 82 brands as venture or minority investments on its site. The fact that it has a formal environmental, social and governance policy also makes it stand out, she said.

So if it’s investing in everything from fashion to pet food, what is L Catterton’s strategy?

Rather than invest in specific sectors, the firm focuses on consumer trends to identify high-growth opportunities and uses extensive consumer research. Among the trends driving its investments, according to its site, are rapid technological transformation, economic polarisation, the rise of environmental and sustainability concerns, increased emphasis on health and wellness, growing diversity, the shift to direct-to-consumer and digital sales channels and more.

Is the Birkenstock IPO the start of a genuine thaw in the IPO market?

Fashion and beauty activity in the public markets has been at a near standstill for more than a year, Lanvin’s listing in December 2022 being probably the most notable exception. But with the Oddity Tech IPO and now Birkenstock’s imminent listing, investors and onlookers are wondering if it means activity is ready to pick up again. At the moment, Shein is said to be eyeing a listing, though it denies the reports, while Kim Kardashian’s Skims is believed to be in the planning stages.

It may be too early to say definitively, but in Choi’s view, it would be no coincidence for L Catterton to lead the way.

“Given this economic backdrop, higher-quality companies are bound to come back into the IPO space first, so it makes sense that a lot of these companies coming back to the public market are private-equity backed,” she said. “Hopefully this means more higher-quality companies could follow suit.”

In a Sept. 19 research note, analysts at Morgan Stanley also noted that higher interest rates, while not great for VCs raising capital, haven’t historically hurt IPOs. “While one swallow does not make a summer, the recent (and higher profile) issuances and their performances since IPO are giving the market cause for cautious optimism that the IPO window may have some longevity to it,” they wrote.

The Formula 1 driver has been an IWC brand ambassador since 2013.

Lewis Hamilton is continuing his work with IWC Schaffhausen with a new collaboration.

The seven-time Formula 1 champion is teaming with the watch brand to create a limited-edition Portugieser Tourbillon Rétrograde Chronograph watch. There will only be 44 styles of the watch available for sale, which is meant to reflect the number of races Hamilton has participated in throughout his career. The watch is priced at $169,000.

“It has been an honor and a pleasure to work with Lewis on this project,” said Christian Knoop, chief design officer at IWC. “His passion for IWC and comprehensive knowledge of mechanical watches were palpable at every stage of the two-year development process. Lewis knew exactly what he wanted and brought excellent ideas to the table. The result is a timepiece that combines his unerring sense of aesthetics and love of bold colors with some of the finest watchmaking technology ever developed in Schaffhausen.”

The timepiece is designed with a 43.5-millimeter platinum case and a teal-colored dial embellished with 12 diamonds. The dial features Hamilton’s logo, which is meant to resemble a panther’s eyes. The watch also includes a tourbillon that’s designed with a wheel rotating around its axis in a small cage.

Hamilton has been an IWC brand ambassador since 2013. This is the third time he’s partnered with the watch brand to design a special-edition timepiece. The F1 driver has become equally known for his skills on the race track as he is for his fashion sense, which has earned him brand ambassador roles at brands like Tommy Hilfiger, Puma and others.

The recently listed company enhances its portfolio with majority stakes in two upscale Italian brands.

MILAN — Furnishings, lighting and contract group Italian Design Brands has acquired majority stakes in two upscale Italian brands.

IDB said it bought 51 percent of Turri, a luxury furniture business founded in 1925 in Carugo on Lake Como. Turri, which works with leading architects such as Daniel Libeskind and China-based designer Frank Jiang, has a strong international presence. In the same statement, IDB said it also increased its interest in design lamp manufacturer Axolight to a majority stake of 51 percent, after purchasing a minority share in 2021.

Home to Gervasoni, Meridiani, Saba Italia and Gamma Arredamenti International, Italian Design Brands was listed on the Milan Stock Exchange in May and also owns contract businesses Cenacchi International and Modar, a key driver of its business.

IDB said the Turri transaction will be financed through IDB’s own means for about 5 million euros and through debt agreements with financial institutions, which are currently being finalized. Turri’s current chief executive officer Andrea Turri will remain at the helm of the company and will reinvest in the transaction, as a minority shareholder.

In 2022 Turri booked 28.1 million euros in revenue, 95 percent of which was generated abroad. It posted earnings before interest, taxes, depreciation and amortization of about 4 million euros in the same period. Benefiting from consolidation of Turri, IDB said it is confident it will reach and “overcome” 300 million euros in turnover for the full year compared to 266.5 million euros the group booked in 2022.

Amid its IPO, IDB said it was focused on enlarging its galaxy of upscale Italian brands with a global reach.

“This new partnership, the first one post-listing and post entry in IDB’s capital of Tamburi Investment Partners SpA, will strategically allow us to consolidate our presence in markets such as the Middle East and Africa, where Turri has an important and prestigious customer base and, at the same time, will allow the brand to benefit from our distribution network to further strengthen itself in Europe, currently the first market for our group,” said Andrea Sasso, CEO of Italian Design Brands.

In the same statement, Turri said he sees the partnership boosting the company’s potential to further penetrate the European and American markets, and in the contract and retail business.

Earlier this year, Tamburi Investment Partners, or TIP SpA, bought a majority stake in IDB’s parent company. TIP, which is helmed by Giovanni Tamburi, founder, chairman and CEO, has stakes in Moncler, Hugo Boss, Italian retailer OVS and Eataly, among others.

The collection will be coming to stores and online in October.

LONDON — Jimmy Choo has teased a collaboration with French fashion house Jean Paul Gaultier coming this October.

The two brands will be working on an exclusive capsule collection of footwear, remixing the two brand’s house codes and a shared vision for “powerful, confident and glamourous femininity,” said Jimmy Choo in a statement.

The design will be headed up by Jimmy Choo creative director Sandra Choi and Florence Tétier, creative director of fashion at Jean Paul Gaultier.

A spokeswoman for the London-based designer confirmed she would pick up the design reins and show a one-off collection next January during Paris Couture Week.

Rocha posted on her Instagram account a bouquet of flowers with a note from Gaultier saying “Congratulations on your show. And see you for your next one…in Paris.”

The designers sketched a mini portrait of himself, dressed in a sailor-stripe top, and signed it “Jean Paul.”

Rocha will be the sixth guest couturier after Rabanne’s Julien Dossena, Haider Ackermann, Olivier Rousteing of Balmain, Glenn Martens of Y/Project and Diesel and Sacai’s Chitose Abe.

Following his retirement from the runway in 2020, Gaultier came up with the idea of the couture house inviting different designers to interpret his vast and eclectic oeuvre, achieved over a career spanning 50 years.

It’s quickly become a highlight of couture week — and fueled interest in Gaultier’s contributions to the fashion and pop culture.

Rocha, a Central Saint Martins graduate whose collection was immediately snapped up by Dover Street Market, is known for her romance, plays on volume, sheer layering and pearl embellishments.

Footwear has also been central to her collections, and her first big hit were brogues with Perspex heels.

Curbs raise concerns Kremlin is ‘repeating playbook’ by again weaponising energy supplies

Russia has barred the export of diesel and petrol as crude oil prices rise towards $100 a barrel, marking a significant escalation that will raise fears Moscow is weaponising oil supplies in retaliation for western sanctions.

Diesel prices in Europe jumped after the announcement on Thursday, rising almost 5 per cent to above $1,010 a tonne. Crude oil prices also reversed earlier losses, with Brent — the international benchmark — rising 1 per cent to $94 a barrel.

Russia is one of the world’s largest suppliers of diesel and a leading producer of crude. Its crude exports have already been trimmed under a deal with Saudi Arabia and the wider Opec+ group, which has contributed to a 30 per cent jump in oil prices since June.

Market participants are concerned that Russia is moving to tighten oil supply at a time when central banks are struggling to get inflation under control, and with crude prices potentially poised to break above $100 a barrel for the first time in 13 months.

“Russia wants to inflict pain on Europe and the US and it looks like they’re now repeating the playbook from gas in the oil market ahead of the winter months — they’re showing that they’re not finished using their power over energy markets,” said Henning Gloystein at Eurasia Group.

The Kremlin said the ban was “temporary” and designed to address rising energy prices in Russia, but gave no timeframe for when the measures would end and carved out only limited exceptions such as its own overseas military bases.

Russia’s increased supply cuts to Europe after its full-scale invasion of Ukraine last year helped to trigger a global energy crisis, stoking inflation and harming industries and consumers around the world.

“Russia said last year the supply cuts in gas were only temporary but continually tightened the noose,” Gloystein said. “With winter approaching targeting diesel could easily propel oil back above $100 a barrel, with all the uncomfortable ramifications that brings for the world economy.”

While Moscow framed the diesel and petrol export ban on Thursday as a move designed to resupply domestic markets, the timing will raise suspicions in western capitals that Russian president Vladimir Putin is again moving to weaponise energy markets.

Diesel is the workhorse fuel of the global economy, playing a crucial role in freight, transportation and aviation. Derivatives of diesel such as heating oil are particularly susceptible to winter price surges. Germany and the north-east of the US are both heavily reliant on the fuel for heating homes.

Diesel and petrol markets are already relatively tight because of rising demand and refinery maintenance over the summer, with pump prices becoming a growing issue for US president Joe Biden and other leaders.

Russia is the world’s second-largest seaborne exporter of diesel after the US, according to Kpler, a freight data analytics company, and before its invasion of Ukraine was the single biggest diesel exporter to the EU.

The EU and US have largely banned imports of Russian refined fuel since February, forcing Moscow to reroute its sales to Turkey and countries in north Africa and Latin America.

The G7 advanced economies have also tried to impose a price cap on Russian oil sales, while western countries have increased diesel imports from India and the Middle East.

But Russian refined fuel sales, particularly diesel, remain a critical part of oil supplies. In August Russia exported more than 30mn barrels of diesel and gas-oil — a diesel proxy — by sea, according to Kpler.

Russia is a smaller exporter of petrol, exporting only 90,000 seaborne barrels a day in August, Kpler added.

Petrol prices in Russia have risen sharply too, stoking inflation that Putin has called “the main problem” for the Russian economy this week.

One of the main factors boosting Russian petrol exports had been the depreciation of the rouble, which has fallen in recent months, making exports more attractive for fuel producers.

Speculators have increased their long positions as crude has climbed almost 30% since June

Hedge funds are piling into the oil market betting that prices will soon pass $100 a barrel, adding impetus to a rally sparked by production and export cuts from Saudi Arabia and Russia.

Riyadh’s extension until December of a 1mn barrel a day oil cut, in addition to further cuts under its Opec+ target, has compounded Moscow’s move to limit exports and pushed prices for Brent crude, the international oil benchmark, to $95 a barrel this week, a fresh high for the year.

Exchange and regulatory data suggested hedge fund positioning had exacerbated the near 30 per cent move higher in prices since June, with a surge in buying accelerating in the past two weeks for both Brent and US crude futures.

The latest data showed that the combined fund net long position in Brent and West Texas Intermediate, the US benchmark, jumped by 137,000 contracts, or 35 per cent, to an 18-month high of 527,000 contracts in the two weeks to September 12.

The figures, equivalent to more than 500mn barrels or about five days worth of global demand, are a widely followed proxy for the activity of speculative players like hedge funds.

Ole Hansen, head of commodity strategy at Saxo Bank, said that hedge fund interest in oil had been reignited by Saudi Arabia’s announcement at the start of this month that it would keep its voluntary production curbs in place longer than previously thought.

“That was the trigger,” Hansen said. “Suddenly everyone realised the market was set to keep going higher in the short term.”

Saudi Arabia’s energy minister defended the country’s decision to further limit production on Monday, saying that global demand for oil may dip if global economic growth slows in the months ahead. 

But analysts said Prince Abdulaziz bin Salman’s stance could yet become a self-fulfilling prophecy: rising prices risk complicating central banks’ exit strategies and hampering global demand for oil. 

Investors are keeping some of their money on the sidelines, wary, like Prince Abdulaziz, of signs of macroeconomic stress in China and a potential period of stagflation in Europe.

Doug King, chief investment officer at RCMA Asset Management — who runs the $300mn Merchant Commodity Fund — said he was not convinced oil would go that much higher as the strength in the market was being driven by Opec+ supply restraint, rather than particularly strong demand.

“The move higher is not massively structural, I think it’s more contrived,” said King. “We’re approaching the upper end of this move in my view, as if we get above $100 a barrel I suspect we’ll see more barrels leak on to the market.”

Other investors were using the options market to hedge against prices passing $100 a barrel before the end of the year. As of Friday, funds had bought about 37,000 call options in WTI — which give investors the right to buy a stock or commodity — expiring in December at a “strike” price of $115, according to Charlie McElligott, an equity derivatives strategist at Nomura. “Hot moves risk bringing in tourist buyers,” he said.

“The march to $100 [a barrel] seems relentless,” said Ehsan Khoman, head of research for commodities at MUFG Bank. “The question is how long does it stay there.”

Ryan Fitzmaurice, head index trader at broker Marex, said that oil currently looked like a “heavily momentum-driven market”, with spot prices for oil moving significantly above those for delivery later in the year, a market phenomenon known in the industry as backwardation.

While funds tend to concentrate trades in the front month, Fitzmaurice said oil producers were selling contracts for later delivery to lock in higher prices for future production.

“That’s resulted in this extreme curve shape,” said Fitzmaurice.

Higher oil prices are already affecting wider stock markets. The Dow Jones US Airlines index has dropped 24 per cent since July 11, with Delta Air Lines and American having slashed their third-quarter earnings forecasts because of rising fuel prices. The S&P 500 Energy index, in contrast, is up 11 per cent over the same period.