What Happened: Exor, the holding company of Italy’s billionaire Agnelli family, announced on March 8 that it is taking a 24-percent stake in Christian Louboutin for the price of $640 million, creating a $2.73 billion value for the red-soled shoemaker. The transaction is expected to close in the second quarter of 2021, with Exor appointing two of the seven board members.
Over the years, Louboutin has refused offers to buy the company, even from the likes of LVMH, but stated on Monday that Exor’s “longer-term focus and a strong entrepreneurial culture” makes it the “ideal partner.” Together, the two aim to “accelerate the next phase of the company’s development,” while Exor noted significant growth potential in China for the French brand.
The Jing Take: Considering the number of consolidations within the industry — from LVMH’s landmark acquisition of Tiffany & Co. to Jil Sander’s purchase by Maison Margiela’s parent OTB just days ago — this Louboutin deal shouldn’t come as a surprise. Exor, currently the largest shareholder in Ferrari, has already shown an increasing appetite for luxury expansion, as it took a majority stake in Chinese luxury lifestyle label Shang Xia last December.
In particular, this latest partnership signals growing investor interest in the footwear category, coming on the heels of Birkenstock’s sale to the private equity firm L Catterton earlier this month. However, not all footwear types are faring well during the pandemic. Luca Solca, an analyst at Sanford C. Bernstein, told Bloomberg that “[formal footwear brands] are impacted by a secular casualization trend, of which sneakers are the epitome in the category, and they are difficult to expand into other product categories.” Although Louboutin is best known for its heels, Exor seems to be banking on the brand’s history of “exclusive collaborations” and forays into fancy sneakers to buck against this trend.
Beyond diversifying Exor’s portfolio, the deal is also expected to grow Louboutin’s China presence and e-commerce capabilities. It helps that the shoemaker has already hit the ground running in China. The fashion house recently selected its first China ambassador, the TFBoy’s Karry Wang, in January to front its pop culture-inspired Super Loubi capsule collection (a clear appeal to China’s young consumers). Now, backed by Exor cash, Louboutin is well-positioned to “become one of the world’s preeminent luxury players.” But if it wants to win China, it will first have to go up against heavy hitters like LVMH and Kering, which already boast massive footprints in the market.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.