Burberry's Stock Rises on Moncler's Acquisition Speculation

Burberry's stock increased by 4.6% to £849 following reports that Moncler is considering a bid for the British luxury brand.

The speculation originated from an article in the luxury publication Miss Tweed, which reported a growing buzz about Moncler's interest in purchasing Burberry. Analysts at UBS believe this interest may be due to Burberry's recent market value decline, with shares falling 53% in the past year.

Moncler, known for its signature puffer jackets, stated on Sunday it would not comment on 'unfounded rumors' regarding a potential deal. However, sources indicate that Bernard Arnault, LVMH's controlling shareholder, supports this acquisition idea. LVMH has recently taken an indirect stake in Moncler, heightening speculation.

Analysts suggest Moncler's interest in Burberry could aim at revitalizing the struggling brand and maximizing supply chain synergies between the two coat manufacturers. Nonetheless, they remain cautious about the timing of any move.

Currently, Moncler is focused on acquiring Stone Island, a deal that hasn't met market expectations. With Moncler projected to end 2024 with approximately €1.2 billion in net cash versus Burberry's market capitalization of around €3.4 billion, any acquisition would likely involve a mix of cash and shares.

Analysts at UBS suggest Burberry's shares might react positively in light of its recent financial struggles. However, Moncler's stock response could be more complex, with investors considering the potential dilution impact of a large acquisition, especially since Burberry is expected to report losses this year. Concerns also exist regarding the challenges Moncler might face in turning around Burberry, given that a significant part of Burberry's earnings before interest and taxes is derived from outlet sales.