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Puma welcomes PPR's €5.3-billion takeover bid

Puma welcomed a €5.3-billion ($7.1 billion U.S.), cash bid from PPR that would see it join a stable of brands including Gucci and Yves Saint Laurent, pushing up shares in both companies.

The German sportswear maker called PPR "the perfect partner" and said on Tuesday it would recommend a public takeover offer to its shareholders after PPR agreed to buy a 27-per-cent stake from German billionaires Guenter and Daniela Herz.

"The Puma board of management unanimously believes that PPR's engagement is in the best interests of the company and that the announced offer price per share of 330 euros for the voluntary public takeover offer is fair," it said.

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French luxury-goods and retail group PPR said the acquisition would speed its sales growth and improve profitability and earnings per share. It expects to complete a five-week offer for Puma shares in early July.

PPR said the highly recognizable Puma name would fit with its brand portfolio and that PPR's resources would improve Puma's access to international markets and help expand its high-end product lines.

Shares in Puma, which surged almost 10 per cent before the Easter holiday on market talk of a bid, traded up 9.4 per cent at €343.71 by 8:26 (GMT), 4 per cent higher than PPR's planned offer price.

PPR shares rose 2.9 per cent to €132.79.

Analysts said PPR would be getting the high profit-margin, premium lifestyle brand Puma for a reasonable price. Some speculated a counterbid could emerge from a rival such as Nike or that PPR might raise its offer.

But PPR said the offer price was "a firm and definitive one."

Puma has often been the subject of bid speculation, especially in the wake of rival Adidas's $3.8-billion (U.S.) acquisition of Reebok last year.

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HVB raised its investment recommendation on Puma to "buy" from "hold," saying it believed a fair value for Puma shares would be more than €400 per share, including a takeover premium of at least 20 per cent.

Kepler Equities analyst Cedric Lecasble said PPR had been having trouble finding affordable premium luxury brands to acquire and said the price PPR would pay for Puma was lower than Kepler's target price of 345 euros per share.

"We are convinced that a successful bid on Puma would announce further asset disposals of lower margin businesses (YSL Beaute, Fnac, Conforama, Redcats) to complete the repositioning of the group," he wrote in a note.

Mr. Lecasble kept his "buy" recommendation on PPR but cautioned: "A counter bid might still be a possibility."

Brokerage Natexis Bleichroeder wrote: "There is a slight risk of volatility to PPR's share price due to this unexpected deal (which comes outside the luxury goods sector), but we remain confident over PPR's track record in acquisitions."

Natexis kept a buy rating on PPR.

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