PPR buys jeweller Qeelin to expand in China

PARIS - French retailer PPR unveiled its first acquisition in China - a majority stake in fine jeweller Qeelin - and said more small deals could follow in the region, a key market for luxury goods.

The deal, whose terms were not disclosed, also beefs up PPR's presence in the jewellery market, where it already owns French brand Boucheron.

"The brand is small in view of its size but big in view of the potential of the Chinese and Asian markets," Alexis Babeau, managing director of PPR's luxury division, told a conference call on Monday.

The transaction highlighted PPR's strategy of focusing on small brands with strong potential that can best be tapped with the backing of a luxury giant.

PPR, the world's third-largest luxury group behind French peer LVMH and Swiss company Richemont, is also following rival luxury groups in investing in China.

Richemont bought a controlling stake in Chinese upscale designer Shanghai Tang in 1998. French group Hermes created Chinese label Shang Xia, which makes traditionally inspired jewellery and furniture is set to open its first Paris store in 2013.

European luxury goods groups have been increasingly relying on affluent shoppers from Asia, particularly China, and their appetite for high-end brands to drive sales at a time of muted growth in Europe.

Babeau said Qeelin's sales were close to the 34 million euros ($44 million) generated by Italian luxury goods maker Bottega Veneta when PPR bought it in 2001.

CA Cheuvreux analysts pegged Qeelin's enterprise value at around 70 million euros.

Qeelin was founded in 2004 by Chinese designer Dennis Chan and French entrepreneur Guillaume Brochard.

The label uses mythical and Chinese symbols such as lions, pandas, and dragons to make pieces of luxury jewellery which sell for around 4,000 euros, on average.

Headquartered in Hong Kong, Qeelin employs 50 people worldwide and operates seven boutiques in mainland China, four in Hong Kong, and three in Europe. It is also distributed in trendy stores such as Colette in Paris and Restir in Tokyo.

"We have great ambitions for the brand and will make it benefit from our expertise and know-how so that it can speed up its development," PPR chairman and chief executive Francois-Henri Pinault said. PPR plans to develop Qeelin's store network, mostly in China.

($1 = 0.7735 euro)