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Countdown at Cavalli: Bidding Process Begins for Stake in Firm

Roberto Cavalli is going under the hammer.

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MILAN — Roberto Cavalli is going under the hammer.

This story first appeared in the April 8, 2008 issue of WWD.  Subscribe Today.

After months of hype and several false starts, the bidding for a stake in the privately owned fashion label is expected to kick off shortly, after the deadline for suitors to express interest closed Friday, according to sources.

WWD understands that private equity houses Blackstone Group Holdings, Candover, The Carlyle Group, Cinven and Valentino Fashion Group-owner Permira are among potential bidders.

Merrill Lynch, which is advising on the deal, is expected to distribute a formal information memorandum to a short list of interested parties in the next few days, sources said Monday. Suitors will then have two to three months to conduct due diligence before making an offer, although any sale is likely to take at least another three to four months to be completed.

Neither Cavalli, nor the majority of the parties supposedly involved in the auction, would comment on the speculation Monday. Merrill Lynch, Carlyle and Permira did not return calls seeking comment at press time.

Cavalli has spoken for 18 months of possibly selling a stake in his company. His profile has risen higher and higher over the last few years as the designer has expanded his distribution, opened more stores and, in 2007, linked up with H&M for a one-off collection that created mania from Manhattan to Tokyo.

Recent estimates value Cavalli in the region of 1.2 billion euros, or $1.89 billion at current exchange, well short of the 2 billion euro, or $3.14 billion, price tag the designer is believed to have slapped on the business he set up more than 40 years ago.

Cavalli is also understood to want to maintain a majority stake in any prospective deal and has already rejected “a couple of offers” valuing the business at around 1 billion euros, or $1.57 billion, sources said.

In 2006, Saudi Arabian private equity fund SAB Capital submitted a bid for 60 percent of the fashion label, famous for its animal-print designs, but an agreement was never reached.

Last year, Cavalli said he planned to float the business on the stock market, preferring it as a means “to grow and strengthen our business…compared to selling part of the company to new partners.”

He appears to have shelved those plans. However, with worsening economic conditions undermining liquidity in the marketplace, industry insiders say the designer will have to revise his valuation if he wants to line up a buyer.

Cavalli has not released official results for 2007, although sales for the year are reportedly in the region of 238 million euros, or $326.2 million. The company reported revenues of 150 million euros, or $201.8 million at average exchange, in 2006.

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