French firm PPR to close $1.6 billion deal, move raises speculations

French holding company, PPR, is entering into exclusive negotiations with South Africa-based Steinhoff International Holding Ltd for a $1.6 billion deal to sell its Conforama furniture unit, the company said in a statement on Thursday.

The negotiations are part of the company's 2006 strategy to focus on its luxury, sports and lifestyle sectors.

This proposed offer would reflect a strategic valuation recognizing the true value of the company, its brand, and the work achieved by the team. The operation, entirely consistent with the company's strategy, would favor its development and would underline the calibre of its employees and management, said François-Henri Pinault, Chairman and CEO of PPR

Steinhoff International has an intimate understanding of Conforama's business and the two companies operate in complementary markets, he added.

The company, which owns luxury brands like Gucci and Puma, stated that the transaction should be concluded in the next weeks after consultation with their personal representative bodies.

The decision to dispose the furniture unit by PPR has been linked by some market participants as a possible bid for acquiring the luxury giant, Burberry. Following the speculations, shares of the Burberry rose around 2.7 percent.

However, a PPR spokesperson told the International Herald Tribune that Pinault is of the opinion that a complementary luxury brand, like an upscale watchmaker, would make a better strategic sense in terms of investment.

With a market value of over $7.9 billion, the spokesman said that investing in Burberry would be a little too much for them.