Speculation builds of Burberry takeover

Speculation of a Burberry takeover bid have seen the London-headquartered luxury fashion company’s share price rise 6 per cent in recent days.

An unidentified party has built a 5 per cent stake in the business. Under London Stock Exchange rules any shareholder holding more than 3 per cent equity must disclose their identity, but an exemption allows investment managers to represent a client with up to 5 per cent. When that threshold was breached briefly in February by HSBC, acting on behalf of the mystery Burberry bidder, the excess was quickly resold.

UK media is reporting that Burberry is “keeping a close watch on the stake”, but has yet to receive any takeover approach.

According to a report in The Financial Times, Burberry has asked HSBC to reveal its client’s identity.

While Burberry maintains strong brand strength, it has suffered from a decline in sales in China and Hong Kong, its key markets, due to the Chinese government’s clampdown on gift-giving and graft, and changing travel patterns of wealthy Mainland Chinese.  As a result, its market capitalisation has slipped to about £6 billion.

The Financial Times nominated LVMH Group and private equity investors as possible buyers of the 5 per cent cornerstone stake.