US fashion group Michael Kors Holdings has agreed to take control of Italy’s Versace in a deal that could value the company at $2.12 billion, sources familiar with the matter said on Monday.
The deal comes as budding luxury conglomerates, including Michael Kors’s US rival Tapestry, the owner of Coach and Kate Spade, are trying to make inroads into an industry still dominated by major European players, including Louis Vuitton owner LVMH.
Michael Kors, whose label is best known for its leather handbags, has made no secret of its ambition to grow its portfolio of high-end brands after swooping on UK stiletto-heel maker Jimmy Choo for $1.2bn last year.
Versace is one of a clutch of family-owned, independent Italian brands that have regularly been cited as attractive targets as the luxury industry rides high on strong demand from China.
But not all brands have benefited equally, with some struggling to refresh their image or products to capture a younger audience, and some fashion groups are looking to diversify with more labels.
The deal gives Michael Kors a megabrand and red-carpet favourite that is among the most recognisable and followed fashion labels in the world. Two of the three sources said the company had agreed to pay a large premium for Versace.
Donatella Versace, who doubles as artistic director and vice-president of the Milan-based group, has called a staff meeting for Tuesday, according to a person who was briefed by a company employee.
The Italian fashion icon has been considering a market listing after US private equity group Blackstone bought a 20% stake in 2014 to fund overseas expansion, although CEO Jonathan Akeroyd has said there was no rush for a market debut.
After investing in Versace at a high multiple, Blackstone found performance disappointing and not sufficient to justify a market listing, said one of the sources, who is close to the family.
“They gradually persuaded the family to look into a possible sale and introduced them to a series of buyers, including Michael Kors.
“Blackstone wasn’t going to put any more money into it. They needed a buyer who could make heavy investments.”
French fashion houses including Paris-based Kering were among those holding talks with the family, the sources said, but thought the price too expensive.
“They didn’t feel the need to invest so much money into another Italian fashion brand,” the source said.
Blackstone will fully exit the Italian company, while the Versace family, which owns the rest of the fashion house, will keep a role, the sources said.
John D. Idol, Chairman and Chief Executive Officer of Michael Kors Holdings Limited (named has since been changed to Capri Holdings Limited), said, “The acquisition of Versace is an important milestone for our group. Versace was founded in 1978. For over 40 years, Versace has represented the epitome of Italian fashion luxury, a testament to the brand’s timeless heritage. We are excited to have Versace as part of our family of luxury brands, and we are committed to investing in its growth. With the full resources of our group, we believe that Versace will grow to over US$2.0 billion in revenues. We believe that the strength of the Michael Kors and Jimmy Choo brands, and the acquisition of Versace, position us to deliver multiple years of revenue and earnings growth.”
Donatella added, “Santo, Allegra and I will become shareholders in Capri Holdings Limited. This demonstrates our belief in the long-term success of Versace and commitment to this new global fashion luxury group.”
“Versace’s management team will continue to be led by Chief Executive Officer, Jonathan Akeroyd, who has been an instrumental partner to Donatella in driving growth and success for Versace worldwide,” added John D. Idol. “He and Donatella have assembled strong senior management and design teams that will continue to lead Versace into its next chapter. We are extremely fortunate to be able to acquire such an extraordinary brand with an incredibly talented team.”
Excerpts of article first appeared on Businesslive.