Newspaper article International Herald Tribune

Buyout Firm Goes Where LVMH Won't

Newspaper article International Herald Tribune

Buyout Firm Goes Where LVMH Won't

Article excerpt

L Capital was founded by LVMH Moet Hennessy Louis Vuitton, but it has pursued more midrange businesses.

While it may share the same first letter as LVMH Moet Hennessy Louis Vuitton, and counts the French luxury conglomerate as an investor, L Capital would like everyone to know that it is its own firm.

That is an impression that has sometimes been difficult to make, given that L Capital was founded 11 years ago by LVMH, whose money still accounts for 15 percent of the firm's total funds. Still, the buyout shop is eager to demonstrate that it follows its own path.

Since its inception, the firm has defined as its main focus not the high fashion of Louis Vuitton or Christian Dior, but what the buyout shop calls "affordable luxury": clothiers like the preppy retailer Gant and higher-ticket health and skin-care companies.

It is a principle that has endured through a decade that included both global expansion and worldwide recession.

"When the crisis came, like everybody else, we stopped to think about whether we should change," Daniel Piette, the chairman of L Capital, said by telephone Thursday. "But we thought that we were absolutely right."

Indeed, LVMH sponsored the formation of L Capital in 2001 with the express purpose of finding and building up luxury brands whose wares were a few levels below $1,000 canvas handbags and $1,800 floral-print parkas. LVMH's longtime chief executive, Bernard Arnault, had said that the affordable-luxury sector had plenty of opportunity but that he could not use his own company to invest in the area.

So he tapped Mr. Piette, a longtime LVMH veteran who had led several acquisitions for the conglomerate, to lead L Capital. Its mandate: Find midsize companies, those with sales of as much as EUR 400 million, and build them up before selling them, ideally to larger competitors -- none of which, coincidentally, has ever been LVMH.

"The view was to create a machinery that was profitable in making money for the group and investors," Mr. Piette said. "LVMH doesn't want to be in that space, but it wants a fund to invest there."

While Mr. Piette, who sits on LVMH's executive committee, said he spoke with Mr. Arnault on a regular basis, the business of L Capital came up very infrequently in conversation. "He doesn't believe that he should have a view, for many reasons," Mr. Piette said. "One of them is that he doesn't talk about what he doesn't know."

Among Mr. Piette's first goals was to build L Capital into a credible global investor. The firm now manages more than EUR 1 billion, or $1.35 billion, with recent investors including the General Electric Pension Trust and the endowment fund of Cambridge University in England, and it runs six offices in Europe and Asia.

One of the firm's most notable deals was the takeover of Gant, the Swedish clothier that produces American-style preppy wares like khakis and oxford shirts. …

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