Activist investor Third Point buys stake in Cartier owner Richemont

Activist hedge fund Third Point has taken a stake in Swiss luxury group Richemont, which owns watch and jewellery brands Cartier and Van Cleef & Arpels, according to people familiar with the matter.

The US-based fund Artisan Partners, which has been a Richemont shareholder for many years and owns a roughly 1.2 per cent stake, has also been pressing the group to improve its performance, according to one of the people.

Third Point did not return requests for comment, while Artisan could not immediately be reached for comment. Richemont, which will report its half-year results on Friday, declined to comment.

Shares in Richemont jumped almost 5 per cent on Monday before paring back gains, putting them at all-time highs.

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An activist campaign at Richemont would have to contend with powerful chairman Johann Rupert, who has long set strategy and chosen managers for the 26 maisons that belong to the group. Although the South African businessman owns only 9.1 per cent of the capital, he controls 50 per cent of the voting rights under a dual-class share structure.

Critics argue that Richemont has not kept pace with competitors during a decade-long boom for the luxury industry largely driven by Chinese consumers. Its market capitalisation has risen 79 per cent in the past five years, while those of LVMH and Hermès have roughly quadrupled.

Analysts have also criticised the group's inability to stem losses at its ecommerce unit Yoox Net-a-Porter, which has lost market share to newer competitors such as Farfetch and not delivered a long-promised turnaround.

It could not be determined what Third Point was aiming to achieve at Richemont, or the size of its investment in the company.

Aggressive tactics

But the hedge fund, controlled by billionaire investor Dan Loeb, can adopt aggressive tactics, such as when it urged Nestlé to sell assets in 2017 and recently when it called for the break-up of Royal Dutch Shell. It can also be more pragmatic with its investments, such as when it took a stake in Vivendi this year ahead of its spin-out of Universal Music Group but did not publicly push for changes there.

Artisan is a more traditional long-term fund but has taken a more activist tack on some of its investments lately, such as a public campaign it mounted this year to remove Emmanuel Faber as Danone chief executive.

Jean-Philippe Bertschy, an analyst at Swiss investment group Vontobel, welcomed the activist fund's investment in Richemont because "external pressure is always healthy" and said the dual-class structure was not "viable nowadays" in terms of governance.

“Third Point and Artisan are in our view the top of the iceberg, as many investors, including us, have been advocating changes for some time.”

Vontobel Asset Management owned about 335,000 shares in Richemont as of the end of June, according to S&P Capital IQ.

Underperformed

Richemont’s shares underperformed sector leaders LVMH and Hermès last year as investors fretted that its jewellery-reliant business would suffer more than others from the pandemic.

But the biggest players in luxury have snapped back faster than expected from the crisis, helped largely by ebullient Chinese consumers who have kept buying at home because they can no longer travel to shop in Europe’s fashion capitals.

That has helped Richemont's shares rise 48 per cent this year, outperforming a 35 per cent increase for LVMH and a 12 per cent rise for Kering, owner of Gucci, but underperforming a 63 per cent surge for Hermès. Analysts have attributed the Richemont rally to investors betting that it has room to improve.

Third Point’s investment was first reported by independent fashion publication Miss Tweed. – Financial Times