Burberry shares climb after mystery investor sparks takeover talk

editorial image

Burberry shares gained six per cent after speculation that the luxury fashion brand could face a multi-billion pound takeover bid from a mystery investor.

The company is reported to have asked HSBC, which is listed as the custodian of the stake, to reveal the identity of its client.

An investor building up a stake could put pressure on the British firm, whose market capitalisation has fallen in the past year amid concerns about falling demand from its key markets in Asia, particularly China and Hong Kong.

A source close to the company said Burberry was focused on the stake and keeping a close watch on it but there had been no formal takeover bid made.

Burberry has spoken to its financial advisers Robey Warshaw and Morgan Stanley about the growing stake, which broke a 5 per cent barrier recently but was now just below the threshold.

A spokesman for the company declined to comment when approached by The Yorkshire Post.

The Financial Times speculated that rival groups such as LVMH or private equity investors could be behind the transaction.

Analysts from Macquarrie said a takeover could value Burberry at £8bn.

Daniele Gianera of Macquarrie told the FT: “Burberry is one of the few luxury brands without family interest and thus an easier target for acquisition.”

Burberry is due to report annual results in April. It announced an internal review at its third quarter trading update in January.

A recent analyst note from Nomura said: “We do not think the brand is under significant pressure, and believe it continues to be well regarded in the fashion and luxury world.

“However, the changing dynamics of luxury growth and expenditure globally suggest the timing of an internal review is justified.

“We hope that Burberry realises, as we do, that the macroeconomic prospects are more cautious/subdued than they have been in recent years, which in some instances have been driven by artificial demand in China, for example, and unsustainable levels of trade in Hong Kong.

“However, this does not mean that brands cannot grow, expand and continue to invest. However, competing with peers for market share may be more apparent. And from a shareholder perspective, aligning the strategy and cost base, as well as allocating capital in this new world, will be crucial.”

Burberry is planning to invest £50m in a state-of-the-art trenchcoat factory in Leeds.

Work on the site is due to begin in 2016 and the new facility is due for completion in 2019.

Nomura said it expects Burberry’s review to focus on productivity to help grow like-for-like sales and raise sales densities, which should make the brand more profitable.

The brokerage said it would like to see more focus on costs, adding “the brand appears ‘over costed’ in anticipation of significant growth”.

Nomura said: “We expect this review to be thorough, given chief executive Christopher Bailey will have been at the helm two years in May.

“A change of the group’s approach would be a positive to the market.”

Halifax-born Mr Bailey, 44, joined Burberry as design director in 2001. He was appointed chief creative officer in 2009.