Michael Kors Set to Purchase Versace *Update* Confirmed!

[Benn98]

Michael Kors???? Solid business acumen for their own brand, but I'm not sure how it would impact Versace, who recently adopted a different direction. Doesn't bode well......

 

[Fashionstuff]

They aren’t. That’s why it’s weird...
They have been profitable since 2011.

I know from a source that they are selling more clothes than accessories but even if they wants to increase their accessories business, I wouldn’t trust Kors!

Or maybe they couldn’t resist the 2 billion offer.
Fendi choose Bernard Arnault instead of Prada at the time because he offered 1 billion...

I think it is hard to resist.
Donatella is not so young, maybe the rest of family isn't so interest in designing anymore.
The Bloomers wrote Donatella will still play her role, how long?
Maybe their revenues weren't so good and the competiotion is too hard and 2 billions are irrestitble , maybe they afrai they will not get such a high offer is they will wait and try to resolve or or or...
I remeber Versace in the 1988-90.
Shall we say "RIP" to Versace? Maybe ...

 

[happycanadian]

Just googled it myself and I am surprised as well ! I wonder if Tisci was planning to go to Versace, but this development maybe deterred him because I still find the Burberry appointment strange. I don't know.

That's the first thing I thought of, as well. It seemed like such a no-brainer that Tisci was headed to Versace. And then the sudden switch to Burberry was very ... huh?

 

[perhydrol]

Donatella is not so young, maybe the rest of family isn't so interest in designing anymore.

Well, Allegra has been involved in designing or styling Versus (not sure here) so I wouldn't say that they're not interested in designing anymore.

 

[Benn98]

The idea that she'll still retain complete creat autonomy is a myth. No investor will pump money into a venture and say 'you can run it as you wish.' Doubt it. And what's more, if the brand isn't doing enough revenue to provide attractive returns to it's investors, they'll sure as hell will step in and start meddling.

But I suppose jumping into bed with a corporate Wall Street businessman disguised as a designer is the lesser evil of running another tab with the Mafia. At least Donatella and Kors can share tanning tips.

 

[MulletProof]

Ok, feeling very.... after glancing over this stuff on the Guardian, can someone do one of these "as explained to a 5 year-old" about the stake percentages?

Cause I don't get it (who ends up with what), but for whatever reason, I want to.. really need to figure out this Michael Kors buying (lol) Versace issue in my life...

 

[Salvatore]

Ok, feeling very.... after glancing over this stuff on the Guardian, can someone do one of these "as explained to a 5 year-old" about the stake percentages?

Cause I don't get it (who ends up with what), but for whatever reason, I want to.. really need to figure out this Michael Kors buying (lol) Versace issue in my life...

Hahah
I'm confused about that as well. I read that they are buying the 20% from Blackstone which would fully exit, but what remains to be seen is how much of the Versace 80% is being sold. It must be all of it, non ?

I've never been as troubled and concerned by a fashion brand being acquired by a group/business as this.

 

[Benn98]

I highly doubt whether Versace would sell entirely to Kors. I imagine it would just be a stake? Blackstone, who owns 20%, will sell their full percentage - that's confirmed. Donatella, Allegra and the family will probably only sell a chunk of their 80%, it's still uncertain how much they will sell. But word is that the 20% from Blackstone, and the 'to be confirmed' percentage from the family will position Kors as a majority shareholder.

Also, they're not only selling to make profit. I think A, Blackstone wants out and the family couldn't afford to buy their 20% back. And B, as Lola mentioned, Versace's clothes are selling but not their accessories. The idea is that Kors would help them in that department, as they did when they revamped Jimmy Choo. Incidentally the revamped Jimmy Choo has been performing beyond expectations after Kors bought the brand last year for about $1.odd bn.

 

[ghostwriter10549]

God has left us.

 

[Benn98]

Confirmed!

Game On: Michael Kors Acquires Versace for $2 Billion

In the race to build America's first-ever luxury conglomerate, Michael Kors has acquired the world-famous Italian fashion house. But does it have what it takes to turn Versace's price tag into profit?


BY CATHALEEN CHEN AND LAUREN SHERMANSEPTEMBER 25, 2018 12:01

NEW YORK, United States — American conglomerate-in-the-making Michael Kors is buying Italian fashion house Versace for an enterprise value of approximately $2.12 billion, the company announced on Tuesday. That's 2.5 times the brand's current revenue, and 22 times its EBITDA (earnings before interest, taxes, depreciation and amortisation).

The primarily cash deal — with only 150 million euros in stock — is expected to close in the fourth quarter of 2019, reduce earnings in the first year, but contribute profits starting in year two.

In a presentation released to investors, Kors — which will be renamed Capri Holdings Limited— outlined its plans for Versace, including increasing its global retail footprint from 200 stores to 300, building out e-commerce and expanding men's and women's accessories and footwear. (It currently makes up 35 percent of the business, the group would like to increase that to 60 percent.)

The move is calculated to position the accessible luxury juggernaut, which acquired high-end shoemaker Jimmy Choo in July 2017 for $1.2 billion, to take a bigger slice of the high-end luxury market. US rivals PVH Corp. and Tapestry are also trying to build portfolios of luxury brands to better compete with the likes of the European conglomerates that dominate the sector.

In acquiring Versace, Michael Kors is also attempting to offset sliding sales of its core brand, which is closing retail outlets and trying to reduce its reliance on department stores. In August, the company said comparable sales would remain flat this year, though profits are expected to rise as it continues to move away from discounting. Michael Kors reported $4.7 billion in revenue in its most recent fiscal year, ending in March, with $222 million coming from Jimmy Choo. Same-store sales rose just 0.2 percent from the previous year.

Versace, for its part, has a world-famous name, but has been struggling to grow a business of similar scale for years, at one point entertaining a public flotation in order to raise funds. In 2009, for instance, the company generated just €270 million ($318 million) in sales, with losses close to €80 million ($94 million).

In fact, the brand ran losses from the late 1990s to 2011, with the family selling a 20 percent stake to Blackstone in 2014 — a deal that valued the fashion house at $1.4 billion.

"At the end of the day, because Versace is well known everywhere, it is a sleeping giant," then-chief executive Gian Giacomo Ferraris told BoF in 2015. "We had balance in terms of gender, [and] as a brand, very strong international recognition, strong DNA and a fantastic archive. If in some way [we could] awaken this giant — my God, you have a power."

Under chief executive Jonathan Akeroyd — who spent 12 years at Kering running Alexander McQueen before joining Versace in 2016 — family-owned company Givi Holding, which controls the 80 percent of Gianni Versace SpA not owned by Blackstone, posted a profit of €15 million ($18 million) last year after a net loss of €7.4 million ($8.7 million) a year earlier. Revenue was flat over that period at just under $800 million. Versace closed 42 stores in 2017 and plans to roll out a new retail concept early next year.

Versace’s narrow profits, however, point to opportunities for growth, said Mario Ortelli, managing partner of luxury advisors Ortelli & Co. Versace has a brand awareness that’s similar to Gucci or Armani in some markets, “but if you look at revenue, it’s still a fraction of all these brands.” A large part of the gap is down to inconsistent positioning and its inability to grow a meaningful leather goods business, a highly lucrative product category, Ortelli added. “This will be a great opportunity for Michael Kors, but it will require time and excellent execution to eventually achieve it.”

Why Michael Kors Sees Versace as a Good Fit

By buying Versace, Michael Kors will unlock some cost-saving synergies when it comes to getting better deals on real estate and media. But the combined company has a very long way to go before approaching the scale of European conglomerates like Kering and LVMH. Michael Kors, Jimmy Choo and Versace combined brought in less revenue last year than Gucci alone did for Kering.

“I don’t think having three brands brings the same firepower as a player like LVMH,” said John Guy, an analyst at MainFirst. “There are some benefits, though.”

More importantly, Michael Kors’ aspirations to climb upmarket and claim a bigger chunk of luxury sales make sense: total luxury sales are slated to grow by up to 8 percent this year, according to Bain, outpacing the mid-market sector that the company has relied on in the past (65 percent of sales came from mid-priced accessories last year).

Versace also brings expertise in producing luxury apparel — which represents a majority of the brand’s revenue, compared with 21 percent from shoes and 25 percent from leather goods — to the budding group. (Michael Kors ready-to-wear is currently manufactured through a license with Gibo.)

And while Jimmy Choo, Michael Kors and Versace may not align on all fronts, each brand does possess a gold-plated glamour that gives the group a certain recognisable aesthetic glitz. “Kors is jet-setting; it’s a little over-the-top at times and it’s got some bling — that would fit the Versace [aesthetic],” BlueFin analyst Rebecca Duval said. “But luxury really is on fire right now overall… I think everybody is always looking for M&A, and there are still opportunities out there as the macro environment has gotten a lot better.”

Versace Comes at a Steep Price

Many Kors' analysts and investors have questioned how the Italian house, known for its upscale flash, will fit with the American brand, where sales are driven by less outré items, including handbags that typically sell for under $400. Some observed that the $2 billion price tag was far too high for a company that has struggled to grow sales and frequently run at a loss, despite its famous brand. Shares fell 8 percent on Monday.

“Michael Kors is out there looking for luxury brands in general and they’ve bought higher multiples than the market would suggest,” William Blair analyst Dylan Carden said.

However, in recent years, fashion brands have been acquired for far higher multiples, including Balmain, which was bought in 2016 by Qatari-backed investment fund Mayhoola for €500 million ($588 million), or 14 times its EBITDA. In August, Italian fashion group Zegna purchased an 85 percent stake in Thom Browne in a deal that valued the company at €500 million; its annual revenue was just $100 million in 2016.

Kors was not the only firm gunning for Versace, which saw interest from most of the world’s big fashion conglomerates, from LVMH and Kering to US aspirants PVH Corp. and Tapestry, according to media reports. The deal could propel these players to go after new acquisitions of their own.

While there isn't a "broad pasture" of privately held companies left in the sector, a number still remains, said Carden, pointing to Tory Burch investor Tresalia Capital's recruitment of Goldman Sachs to explore a potential sale of its stake earlier this year. "Furla's out there, Longchamp is out there, so [they] have the opportunity."

Recently, Versace has ridden a wave of late '80s and early '90s nostalgia by referring back to some of the most iconic looks designed by late founder and designer Gianni Versace, who was assassinated in 1997. The rise of the label and the designer’s untimely death were documented in the 2010 book “House of Versace,” by Wall Street Journal reporter Deborah Ball, as well as American television auteur Ryan Murphy's 2018 series,“The Assassination of Gianni Versace: American Crime Story,” which was based on the 1999 book by Vanity Fair writer Maureen Orth.

Creative director Donatella Versace has led the house since her brother’s passing, although there has been success speculation over the past two years. Riccardo Tisci, once a favoured pick, joined Burberry instead, while Kim Jones (another oft-mentioned name) recently moved from Louis Vuitton to Dior.

Regardless of how long Donatella remains in creative control, the global brand recognition of Versace makes it a compelling prospect. With under $1 billion a year in sales, it is far behind conglomerate-owned rivals including Louis Vuitton, Gucci and Saint Laurent, the latter of which was also founded as ready-to-wear house, not a leather goods maker. Opportunities to expand its accessories and beauty offerings, and to widen its pricing architecture, mean there is high potential for growth. (The brand recently collaborated with streetwear-favourite Kith, indicating that there is appetite to do more beyond its secondary Versus line.)

But the question remains: is Michael Kors the player to best capitalise on the opportunity?

One thing is for certain. Blackstone, which will earn about $120 million on its roughly $280 million investment, is yet another private equity firm set to make a significant return on an apparel company — and in just four years.

There was a time when the world of private steered clear of fashion. No longer.

Source: Businessoffashion.com

 

[Lola701]

So, Kors owns 100% of Versace or the family still have a small or decent stake?
Tbh i find this admirable that a brand like Versace sells more clothes than accessories. It says a lot about the power of the brand...
But Versace is a bit like Dries in a way...The only difference is that it's considered as a megabrand.
The low point about that is that she has to have hits collections everytime even if of course people can buy the t-shirts and silk shirts all the time.


I can totally understand the ambitions behind the thing but I still don't trust Kors.

But i feel like they paid too much for that. Ok, the brand is close to 1b but this is huge.
LVMH paid 1b for Fendi and it took them a little bit more than a decade to turn the brand into a 1b powerhouse. And Fendi had a stronger leather goods business.

Versace suffer from it brand image. No matter how great or cool the collections are, people are always going to associate Versace with hyper-sexy clothes and that kind of vampy aesthetic.
People who buys bags are not buying a status symbol. They are buying a fashion item.

They should expand their beauty business. I still don't understand why a brand that synonymous with glamour doesn't have a full make-up line.
Now, they needs to shut down Versace Jeans Couture, Versace collection and focus on the mainline and Versus.

 

[dodencebt]

The BoF article gives a lot of insight; I had no idea Versace was that small compared to Saint Laurent for example because the brand is extremely recognizable. I'd say more people have heard of Versace than of Saint Laurent or Fendi in many markets.

The style of Versace definitely does make sense for Michael Kors and Jimmy Choo, but only time will tell whether this is a good fit. Michael Kors may be way in over his head here because the amount of money the company paid is huge. Good for the Versace family though.

 

[mepps]

I'm all in for this. Get that cash Donatella.
I don't hate Kors like so many here do.
I think this is a good fit, and It's great to see an American snapping up European luxury brands.

 

[Benn98]

So, Kors owns 100% of Versace or the family still have a small or decent stake?
Tbh i find this admirable that a brand like Versace sells more clothes than accessories. It says a lot about the power of the brand...

It seems Kors bought the entire 80% from the Versace family. Not that it matters anymore, but Allegra owned 40%, Donatella 30% and Santo the remaining 10%.
I don't think it's a steep price. Kors basically paid for the name, which is still strong despite weak sales.

Michael Kors takes over fashion icon Versace in $2.12 billion deal

SEPTEMBER 25, 2018 / 1:24 PM / UPDATED 22 MINUTES AGO

MILAN (Reuters) - U.S. fashion group Michael Kors (KORS.N) has agreed to buy Versace in a deal valuing the revered designer at $2.12 billion, the companies said in a joint statement on Tuesday, making it the latest Italian brand falling into foreign hands.

As part of the deal, Michael Kors agreed to buy all of Versace’s outstanding shares for a total enterprise value of 1.83 billion euros, to be funded in cash, debt and shares in Michael Kors Holding Ltd, which will be renamed Capri Holdings Ltd.
U.S. private equity firm Blackstone, which bought 20 percent of Versace back in 2014, will fully exit its investment.

The Versace family, which currently owns 80 percent of the fashion house via a holding company called Givi, will receive 150 million euros of the purchase price in Capri shares.

The deal is expected to close in the fourth fiscal quarter, subject to regulatory approvals.

The Italian fashion icon has been considering a market listing after US private equity group Blackstone bought a 20 percent stake in 2014 to fund overseas expansion, although Chief Executive Jonathan Akeroyd told Reuters earlier this year there was no rush for an IPO.
After investing in Versace at a high multiple, Blackstone found its performance insufficient 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,” the person added.
“Blackstone wasn’t going to put any more money into it. They needed a buyer who could make heavy investments.”

Source: Reuters.com

 

[dodencebt]

"The Versace family, which currently owns 80 percent of the fashion house via a holding company called Givi, will receive 150 million euros of the purchase price in Capri shares."

So they will have a stake after all, no matter how small.

 

[GivenchyAddict]

I just want to say bravo for Versace to have been able to run their business by selling clothes more than accessories like most of the luxury brands. It means a lot. Easier to build strong and desirable accessories than clothes.

I am not enthusiastic about this deal but if both parts are happy, so be it. Maybe the brand was too heavy for the family with everything happened around it. They all suffered from it, they deserve to let someone handle it.

 

[Benn98]

"The Versace family, which currently owns 80 percent of the fashion house via a holding company called Givi, will receive 150 million euros of the purchase price in Capri shares."

So they will have a stake after all, no matter how small.

True! It's just been released that all three family members will stay on as minority share holders.

 

[reesewu]

I know that Michael Kors' bags are a must-have accessory for upper-middle class yet basic women. But I didn't know that the company was that rich to be able to buy Versace?! When I first read the news, I thought to myself "wasn't it supposed to be the other way around?"

 

[Salvatore]

With this news, as well as MCG possibly leaving Dior and the normal fashion musical chair game, this is quite an interesting fashion week. I am very curious to see what will happen with Versace. I can admit Michael Kors has good business acumen even if I do not think he's a good designer.

 

[khyrk]

I'm interested to see what they will do with the accessories. Versace accessories are not as popular as the other major Italian houses.