China's biggest sportswear brand Anta Sports Products announced on Tuesday it would buy a controlling stake in Puma for 1.5 billion euros ($1.8 billion), making it the biggest shareholder in the historic German sportswear brand.
Anta will buy 43 million shares for 35 euros apiece from the French billionaire Pinault family's Artemis group, the statement to the Hong Kong exchange said, giving it a 29.06% stake.
The price is a more than 60% premium to Puma's last close, according to Bloomberg data, and values the deal at 1.51 billion euros.
The $27.8 billion Hong Kong-listed sportswear company said it would use its expertise to help struggling Puma increase its sales in the lucrative Chinese market. The deal also helps Fila owner and Salomon backer Anta in its quest to become a more global business.
The deal will help Pinault family investment vehicle Artemis reduce its high debt load. Artemis also controls Paris-listed luxury conglomerate Kering.
Puma shares surged 17% initially and were up 6% by 0915 GMT, still near their lowest levels in a decade. The offer represents a 62% premium to Puma's closing share price of 21.63 euros on Monday, and comes as the 3.2 billion euro company tries to revive its fortunes after losing ground to Nike, Adidas, and newer brands like On Running.
Puma has more scope for growth in China, a senior Anta executive told Reuters.
"Puma has more potential in the Chinese market, where they are underrepresented, with only 7% of their global revenues. We have a lot of insight on how to make Puma more successful in China," said Wei Lin, Anta global vice-president for sustainability and investor relations.
Anta, which has a track record of acquiring and revamping Western sports and lifestyle brands, said Puma complemented its existing brands and could increase its international competitiveness.
Anta is the largest shareholder of Amer Sports, which owns Salomon, Arc'Teryx, Wilson, and other brands. Amer has grown Salomon into a major sneaker brand and reported strong revenues even as Nike and Adidas struggled.
Anta also directly owns Fila, Jack Wolfskin, Kolon Sport and Maia Active.
"Anta has a track record of developing brands and we would expect them to be a more active partner than Artemis," Deutsche Bank analysts said.
Anta said it would seek Puma board seats once the deal was finalized, but would not seek a full takeover of the company. Anta shares rose 2% on the announcement.
Founded in 1991, Anta is based in China's southeastern Fujian province.
Puma has been under pressure as sportswear competition has intensified and recent sneaker launches, including the Speedcat, have failed to generate the momentum executives hoped for.
CEO Arthur Hoeld, who took over last July, announced a turnaround plan and 900 job cuts in October, on top of 500 layoffs earlier last year.
Lin said Anta had confidence in Hoeld and his team.
Puma is set to report fourth-quarter results in a month's time, giving investors a first sense of how its plan to limit discounting, improve marketing and cut its product range is playing out.
Artemis, run by Kering chair Francois-Henri Pinault, had previously described its Puma stake as non-strategic. The Pinault family took the holding from Kering in 2018, when the group repositioned itself as a pure luxury player.
"This disposal is consistent with the ongoing strategy implemented by Artemis to focus on controlled assets and to redeploy its resources towards new value-creating sectors," Artemis said in a statement.
The deal is subject to antitrust clearances, shareholder approval at Anta, and regulatory approvals in China and other jurisdictions.
