Kering in talks with La Redoute management about buyout
PARIS (Reuters) - Kering (PRTP.PA) has entered into exclusive talks to sell mail order and online retailer La Redoute to its managers in a fresh attempt to offload the loss-making business.
La Redoute is the last retail business Kering needs to sell to complete its transformation from a retailer to a group focused on luxury and sports brands, a process which started in 2006 with the disposal of the retailer Printemps.
Kering issued a profit warning last month, blaming one-off charges related , which owns luxury brands Gucci and Yves Saint Laurent, to the disposal of La Redoute and the restructuring of its sports brand Puma (PUMG.DE).
On Wednesday the company, previously known as PPR and before that Pinault Printemps La Redoute, said it was in talks with La Redoute's chief executive Nathalie Balla and Eric Courteille, chief administrative officer of Redcats, La Redoute's immediate parent.
Financial details of the management buy-out (MBO) were not disclosed.
La Redoute sells a wide range of products, from furniture and bed sheets to clothing and sex toys and despite its own move online, it has been struggling to beat fierce competition from specialist and discount internet retailers.
Kering has injected more than 400 million euros ($542 million) into La Redoute since 2008 and would be ready to inject at least another 300 million in order to cover its losses for a few years more and finance its restructuring, sources close to the matter have said.
Kering said it would recapitalize both La Redoute and its deliveries partner Relais Colis as part of the deal to "ensure that both companies enjoy a healthy financial position backed by a significant cash surplus."
But it has also said significant job cuts will be needed in restructuring La Redoute, sparking protests from staff and local politicians in its traditional base in northern France, as well as demands from Lille's Socialist mayor, Martine Aubry, for guarantees over its future.
Aubry criticized Kering for not doing enough to bring La Redoute's logistics, IT systems, and staff training up to date sooner to enable it to compete in a fast-changing market.
Unions fear around 700 jobs are at risk. La Redoute has around 2,500 staff in France, where the government is battling unemployment at a near record 10.9 percent.
Aubry said in a statement on Wednesday the buyers had asked Kering to inject 600 million euros in La Redoute and she was demanding information about the impact the sale would have on jobs.
"The Kering group and the buyers it has chosen must look after the future of every employee and strongly support them in this crucial phase for the company," Aubry said in a statement.
A company spokesman declined to comment on the 600 million-euro figure.
Kering Chief Executive Francois-Henri Pinault told Le Figaro newspaper in an interview that Kering would inject "several hundred million euros" in La Redoute.
Pinault added that "the exact sum would be decided once the negotiations were over."
But Kering said the management's buyout offer met conditions which included a "responsible plan in terms of job management and respect for the region", and "a long-term, appropriate and realistic industrial plan to continue the necessary changes to the business and ensure its long-term future and development."
In 2012 La Redoute made a loss of 50 million euros on sales of 1.1 billion euros, of which just 300 million came from outside France.
Kering said that under the terms on offer the buyers would create a new entity co-chaired by Balla and Courteille, who would invest in a personal capacity and jointly have the majority shareholding, with the remainder owned by a team of managers.
The company would acquire all the shares of La Redoute, Redoute International and Relais Colis.
Media reports had said Kering received several rival offers for La Redoute which involved real estate company Altarea-Cogedim (IMAF.PA), U.S. investor The Gores Group and an entrepreneur from northern France.