Dec 4, 2013
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Kering in talks with La Redoute management about buyout

Dec 4, 2013

PARIS (Reuters) - Kering has entered into exclusive talks to sell mail order and online retailer La Redoute through a management buyout (MBO), it said on Wednesday, 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 begun in 2006 with the disposal of retailer Printemps.

Kering issued a profit warning last month, blaming one-off charges related the disposal of La Redoute and the restructuring of its sports brand Puma (PUMG.DE).

On Wednesday Kering, previously known as PPR, an abbreviation of 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 were not disclosed.

La Redoute sells a wide range of products, from furniture and bed sheets to clothing and sex toys, but despite its own move online has been struggling in recent years to beat the growing competition from discount internet retailers.

Kering has injected more than 400 million euros (330 million pounds) 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 recapitalise 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 criticised Kering for not doing enough to bring La Redoute's logistics, IT systems, and staff training, up to date sooner to be able to compete successfully against aggressive online retailers.

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.

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."

Under the terms on offer Kering said the buyers would create a new entity co-chaired by Balla and Courteille, who would invest in it 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 including from real estate company Altarea-Cogedim (IMAF.PA), the US fund The Gores Group and a entrepreneur from northern France.

(Editing by Mark John and Greg Mahlich)

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