PPR buys Volcom for $607.5 million

PPR SA, the French owner of Gucci and Puma, just bought Volcom Inc., a Californian retailer specialized in snowboarding. The transaction reached a total equity value of $607.5 million in cash to expand in skateboarding, snowboarding and

surfing.

Both companies announced today in a statement that PPR will pay $24.50 a share for the Costa Mesa, California- based company. The Volcom board of directors has recommended shareholders accept the offer, they said. The offer is a 24 percent premium to Volcom's closing share price of $19.73 on April 29.

Volcom, which makes board shorts and messenger bags, will complement Puma, known for sneakers with a leaping cat logo, according to PPR. PPR is reorganizing to focus on luxury goods as well as sports and lifestyle to tap rising demand for branded clothing and accessories in emerging markets. It spun off African distributor CFAO in 2009 and sold furniture retailer Conforama in March. PPR also plans to shed online retailer Redcats and the Fnac electronics and media chain (and consequently cash in another €3.2bn, following analysts ‘estimations). Thanks to the farewell to the 51% of CFAO and the sale of Conforama, PPR has raised €2.

Volcom, known for its diamond-shaped logo, had net income of $22.3 million in 2010 and revenue of $323.2 million, according to Bloomberg data. Volcom generates two-thirds of sales in the U.S. As soon as the news spread, PPR shares rose as much as 1.80 euros, or 1.5 percent, to 122.55 euros and traded at 121.80 euros as of 940 a.m. in Paris. The company has gained 2.4 percent this year, giving it a market value of 15.5 billion euros ($22.9 billion).

Peter J. Solomon Company acted as financial adviser to PPR while Wells Fargo Securities LLC advised Volcom, according to the statement. The transaction will be completed in the third quarter, according to the statement. Volcom officials that own 14.4 percent of the outstanding shares have agreed to tender all of their shares in the offer.

The movement came amidst some investors’ disappointment on PPR will not be a pure luxury group, Financial Times reported early this week. But Mr Pinault insists in an interview with the journal: “Luxury is not a business to me, it’s a market segment. There is luxury in sports, in hotels, and so you can build a conglomerate in luxury – this is not my vision. We are talking about a strong specialized business – apparel and accessories.”