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MILAN — Cash-rich Qatar is looking to invest in Italy and fashion companies are high on the wish list.
On Monday, Qatar Holding LLC, a global investment firm founded by the Qatar Investment Authority in 2006, signed an agreement with Italy’s Fondo Strategico Italiano, the holding controlled by Cassa Depositi e Prestiti, or CDP, a joint-stock company under public control, to create a joint venture, IQ Made in Italy, which will invest in Italian brands.
According to the agreement signed by Qatar Prime Minister Sheikh Hamad bin Jassim al-Thani and Italian Prime Minister Mario Monti, the new company will have total capital of 2 billion euros, or $2.5 billion at current exchange rates, provided equally by Qatar Holding LLC and the Fondo Strategico Italiano over the next four years.
IQ Made in Italy will invest in a wide range of companies in various sectors, including fashion and luxury; food; furniture and design, and tourism and leisure.
Monti kicked off his tour in the Persian Gulf over the weekend, meeting with institutional figures and the business community in Kuwait City, including Sheikh Sabah al-Ahmad al Jaber on Sunday. The goal of Monti, who is also visiting the United Arab Emirates, is to present Italy as a reliable country, which can attract foreign investments and is open to collaborations with the Gulf.
Qatar’s prime minister also revealed that he is working with the Italian government to reach another agreement, valued at 1 billion euros, or $1.27 billion, to support Italy’s small and medium-size companies.
“Monti has succeeded in restoring Italy’s credibility and faith in the country’s potential at an international level,” said JTG Consulting founder Tomaso Galli, who has worked for brands such as Gucci and Prada, and who has consulted with Versace and Ermenegildo Zegna.
“He may be criticized locally for the government’s fiscal pressure or its limited measures to spur growth, but he is very credible around the world and I continue to see that during my trips,” said Galli. “He is doing what a prime minister should be doing, what the French and the English have done for decades and Italians have done very little so far. All this is very helpful for Italian companies.”
Federico Steiner, partner and general director of Barabino & Partners consultancy, which works with Brunello Cucinelli, among others, said, “the issue of attracting foreign capital in Italy has always been a problem and such an initiative is more than welcome.” He noted that Italy is emerging from a period when it projected the image of an “unreliable country slowed down by a rigid bureaucracy.”
These are “fundamental initiatives” that help draw countries with big financial resources to Italy. Asked to name fashion brands that would be appealing to investors, Steiner said they would have to be “important at an international level.” Investments in smaller, family-run businesses are “more complicated,” he reasoned, as they are less open to dealing with outside investors. “Clearly, we would rather welcome investors that support Italian companies to grow and expand, or foreign companies willing to invest in Italy so that they can also produce here and create new jobs, more than those that are here only to shop for Italian brands.”
Mario Boselli, head of the Italian Chamber of Fashion, concurred, willing to see investors provide “resources that can help companies achieve their full potential while maintaining their identity.” He praised French conglomerates such as PPR and LVMH Moët Hennessy Louis Vuitton as “examples of excellence,” expanding the Italian companies under their umbrellas. “The ideal situation would be to maintain both production and management in Italy,” said Boselli.
According to speculation here, Qatar investors may have Versace and Dolce & Gabbana in their sights, but a luxury goods analyst here, who spoke on condition of anonymity, said “Qatar has plenty to deal with already, and the names that periodically appear in the papers are pushed forward by the banks interested in securing new deals. Domenico Dolce and Stefano Gabbana have repeatedly said they don’t want to sell; Giorgio Armani is not interested; there are no transactions going on at Versace; Trussardi, Ermenegildo Zegna, Loro Piana have no plans to sell. These are all big, solid names to put out there in the papers, but it’s not the same as signing on the dotted line.”
Various investment vehicles from the Arab state have been on a luxury and retail spending spree in the past few years. In July, Mayhoola for Investments, backed by a private investor group from Qatar, agreed to acquire Valentino Fashion Group SpA. Qatar Holding LLC took control of Harrods for a reported $2.22 billion in 2010; it has a 1.03 percent stake in LVMH and a 5.2 percent share in Tiffany & Co. It also bought 26 percent of British supermarket J. Sainsbury in 2010. Last year, Qatar became the largest shareholder in French media group Lagardère SCA, with a 12.8 percent stake.
Foreign investors are taking a closer look at Italian companies that boast superior craftsmanship and heritage. “Traveling around the world, you realize how credible Italy is and how foreigners are fascinated by the European and Italian way of life,” said Brunello Cucinelli, whose company went public in April.
Italy’s joint venture with Qatar comes at an opportune time, a moment of transition for the Italian fashion industry, which faces significant growth challenges, generational shifts, austerity measures, high labor costs and general malaise in the euro zone. Tackling these challenges on a daily basis, entrepreneurs and executives are mulling different options, which range from a public listing to partnering with cash-rich partners or selling off.
According to the Fashion Economic Trends study published by the nation’s Chamber of Fashion, the Italian fashion industry’s revenues in 2012 are expected to fall 5.6 percent to 60.2 billion euros, or $78.3 billion at current exchange, compared with 2011. Business is expected to pick up in the last quarter but still fall below the levels of the fourth quarter last year. Exports in 2012 are forecast to drop 2.4 percent to 41.6 billion euros, or $54.1 billion.
Recent successful initial public offerings include Salvatore Ferragamo, Prada and Brunello Cucinelli, while Missoni, Roberto Cavalli and Versace have all insisted on keeping their companies private.
Most recently, Pomellato chief executive officer Andrea Morante said he was evaluating a public listing. Global markets might be uncertain, but Italian fashion firms continue to see an IPO in their future. Moncler, which shelved an IPO last year; Pianoforte Holding, which comprises accessories brand Carpisa, innerwear and beachwear brand Yamamay, and swimwear brand Jaked, and men’s wear group Stefano Ricci all confirmed they continue to eye a stock-market flotation down the road.
Sometimes seeking funds in the private sector means going outside Italy. The fact that the new owners of Bulgari and Valentino are not Italian has triggered strong media reaction and laments of what some perceive as the flight of Italian brands from the country. Bulgari was taken over by LVMH last year. Tailored men’s wear brand Brioni moved under PPR; London’s Goga Ashkenazi took control of Vionnet, once French but more recently owned by Italian entrepreneurs Matteo Marzotto and Gianni Castiglioni; Gianfranco Ferré was bought by the Dubai-based Paris Group; investment firm Eurazeo of Paris took over Moncler, and private equity firm Pai Partners, also from Paris, took a majority stake in Marcolin, with plans to delist the eyewear maker.