Michael Kors set to buy Versace in $2bn deal

Michael Kors set to buy Versace in $2bn deal
Source: Financial Times | Javier Espinoza, Rachel Sanderson and Eric Platt
Date: 24-09-2018 Time: 01:09:01:pm
The deal would come after Versace halted an initial public offering because market conditions were not deemed suitable © Reuters
US luxury group Michael Kors is set to announce a deal to buy Milanese fashion house Versace in a deal worth about $2bn, according to two people briefed on the talks.
The agreement, expected to be announced on Tuesday morning, will see the Versace family selling alongside US private equity firm Blackstone, which took a 20 per cent stake in Versace in 2014. The $2bn valuation includes net debt.
The deal would come after Versace, one of the last independent fashion houses, put the brakes on an initial public offering because market conditions were not deemed suitable, according to a person briefed on the decision.
Another person informed of the talks said the deal was not yet final and Versace had spoken to other possible buyers.
It would be the latest independent European runway brand to decide to sell in recent months. Italy’s Missoni family announced an agreement to sell a minority stake of its eponymous brand to a private equity venture backed by the Italian state before the summer, and Antwerp-based Dries Van Noten sold a majority stake to Spanish luxury group Puig in June.
Meanwhile, Michael Kors has been seeking to buy up brands in order to create a US rival to European luxury conglomerates LVMH, Kering and Richemont.
Versace, famous for its Medusa-head logo, remains mostly in the hands of Donatella Versace, 63 — sister of founder Gianni Versace who was murdered in 1997 in Miami Beach — Santo Versace, 73, Gianni’s brother, and Allegra Versace Beck, 32, Gianni’s niece.
Donatella, after overcoming a spiral of addiction and depression following her brother’s murder, has staged a revival of the brand, hiring outside managers to put it on the road to a public listing or sale. The entrance of Blackstone with a 20 per cent stake was a key step in improving governance, but it has still struggled to aggressively boost revenues and profits. The brand returned to profit last year posting earnings of €15m on revenues of about €680m, according to a person who has seen the numbers. About half of its sales are made in Asia.
Nonetheless, Versace has raised its media profile in the past year ahead of a potential sale. In September last year, Ms Versace brought back 1990s supermodels Carla Bruni, Claudia Schiffer, Naomi Campbell, Cindy Crawford and Helena Christensen to walk the fashion house’s catwalk show, which included a retrospective of Gianni’s best known designs.
Michael Kors has sought to put several difficult years behind it, after the double-digit same-store sales growth it recorded following its initial public offering evaporated. The entry-level US luxury brand shuttered stores in 2017 to bolster profitability and, in the same year, the group pounced on Jimmy Choo, the maker of pumps that can retail for more than $2,000 a pair.
The decisions have paid off, with its most recent quarterly results showing an improvement in the closely watched same-store sales metric. Operating profits and revenues have also been on the rise, which analysts at Cowen attributed partially to the company’s decision to reduce promotions and focus on higher priced merchandise.
Italian newspaper Corriere della Sera first reported the deal. A spokesman for Versace declined to comment. Michael Kors and Blackstone were not immediately available for comment.