PARIS PPR (PRTP.PA) is buying Milanese jeweller Pomellato with the aim of developing it into a global brand and expanding the French luxury and sports group's presence in the jewellery market.
The group, which already owns Boucheron and acquired China's Qeelin last year, said it was looking for further opportunities in the branded jewellery sector.
The industry is increasingly dominated by mega brands such as Richemont's CFR.VX Cartier, Tiffany (TIF.N) and Bulgari, adding pressure on mid-sized players like Pomellato to tap big groups to grow and fund costly ad campaigns.
Analysts predict annual sales in the branded jewellery segment of the luxury industry are set to rise between 5-10 percent over the next few years as consumers increasingly regard jewellery products as fashion items.
PPR, which owns fashion brands Gucci, Yves Saint Laurent and Stella McCartney, is changing its name to Kering in June to mark the completion of its transformation from a retail to a sports and luxury group.
Pomellato is known for its colourful wares advertised by actress Tilda Swinton and its cheaper Dodo line - named after the extinct Mauritian bird - which specialises in animal motifs.
PPR declined to give the transaction's financial details but Chief Financial Officer Jean-Marc Duplaix said the price was "in line with the multiples of the industry."
He said Pomellato's earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to 15 percent of the company's 146 million euros of sales last year, up from 102 million euros in 2009.
Analysts estimated the deal gave Pomellato an enterprise value of around 380 million euros, or 16 times EBITDA, which included debt of 60 million.
"The price seems correct in light of the brand's growth potential and margin growth prospects," said Marc Willaume, analyst at broker Raymond James.
Tiffany trades on 9-10 times EBIDTA while Swiss watch group Swatch UHR.VX acquired the fine jewellery unit of Canada's Harry Winston HW.TO earlier this year for 31 times its EBITDA.
When LVMH (LVMH.PA) took on Bulgari in 2011, it paid 28.2 times the Roman jeweller's EBITDA.
Shares in PPR, which rose more than 2 percent in early morning trade, were 1.25 percent higher at 174.65 euros by 1130 GMT, among the top performers on a 0.7 percent firmer French blue-chip CAC 40 index .FCHI.
PPR said it had a signed the deal with Ra.Mo, the holding through which Pomellato's founder Pino Rabolini and Chief Executive Andrea Morante control 79 percent of the company.
Rabolini sold his entire stake but Morante, who would remain as chief executive, had kept a small stake, leading analysts to estimate PPR acquired a holding or more than 75 percent.
Italian jeweller Damiani (DMN.MI), whose bid for control of Pomellato was rebuffed by the company's board, sources told Reuters last month, will retain its 18 percent stake.
Asked if PPR would consider buying out Damiani, Duplaix said: "It is not a priority for us at the moment."
The Pomellato purchase will boost PPR's average growth profile, held back by struggling sports brand Puma (PUMG.DE) and mature luxury fashion brands such as Gucci.
"Pomellato enters in a new phase where PPR can provide the needed financial resources (probably missing beforehand) to invest in the retail network development and bring the brands to a global scale," said Mario Ortelli, an analyst at Bernstein.
($1 = 0.7683 euros)
(Editing by David Cowell)