Home Fashion Permira to launch €2.6 bn bid for Valentino

Permira to launch €2.6 bn bid for Valentino

Milan, Private-equity firm Permira said that it struck deals to increase its stake in Valentino Fashion Group SpA to about 53%, and that it plans to launch a full €2.6 billion ($3.5 billion) bid for the luxury-goods maker. The deal is the biggest luxury-goods acquisition by a private-equity investor, and confirms an increasing appetite among private-equity firms for the high-margin, highflying luxury sector, buoyant after emerging from a long depression brought on by a slide in tourism and travel after the Sept. 11, 2001, terrorist attacks on the U.S. London-based Permira said it had agreed to buy 10.8 percent of Valentino -- known for its floor-sweeping gowns -- to add to its existing 29.6 percent stake, and could take another 12.4 percent through an exchangeable bond, all at 35 euros per share. Permira's full buyout offer will run from July to September. The price would value the entire company, whose elegant dresses have been worn by actress Sophia Loren, at 2.6 billion euros. Permira had been in exclusive talks with members of the Marzotto family over the extra stakeholdings. Apart from the fashion house founded by 75-year-old design veteran Valentino Garavani, Valentino Fashion Group's main asset is a majority stake in German menswear maker Hugo Boss AG. While Valentino has been restored to profitability, it is still much smaller than Hugo Boss. Valentino had 2006 revenue of €240 million, while Hugo Boss sales totaled €1.5 billion. The change in control at Valentino automatically triggers a takeover offer for minority owners in 51%-owned Hugo Boss. Permira automatically inherits close to 80% of voting rights at Hugo Boss, and said in a statement released in Frankfurt that as far as the German company is concerned, it won't offer a premium on the mandatory bidding price required by German securities law, which is the average share price during the past three months. Permira will now make an offer for both Valentino and its Hugo Boss German menswear business, the London-based private equity fund said. A source close to the talks said the bid could come by the end of the summer.Under Italian law, once Permira has over 30 percent, it has to launch a full takeover for the fashion designer. Valentino is one of the world's most recognised style brands and analysts say private equity has the potential to expand it internationally and into younger, cheaper ranges. A Valentino signature red gown can cost $10,000. Permira said it would delist Valentino if its offer were successful. For Hugo Boss, Permira said the price offered would be the average weighted price over the past three months, determined by financial services watchdog Bafin. The latest figure on Bafin's Web site, from May 24, gives an average weighted price over the past three months of 43.26 euros for Hugo Boss preferred shares and 47.73 euros for the ordinary shares. Hugo Boss preferred shares were quoted at 46.25 euros at 4:35 P.M. British time while the ordinary shares were at 50.49 euros. Valentino shares were quoted around 34.5 euros before being suspended earlier on Friday ahead of the Permira statement. Private equity firms are showing an increased interest in the fashion world, with no sign of a let-up in booming sales of luxury goods in emerging economies like China, India and Russia. Mediobanca, Citigroup, UniCredit, Eidos Partners and Banca Leonardo advised Permira on the deal.

 

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