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Cavalli May Sell After All

Designer Roberto Cavalli could sell stake to private equity fund Clessidra SGR SpA.

MILAN — Much like a modern-day Hamlet, Roberto Cavalli is weighed down by his own dilemma: to sell or not to sell?


While only a week ago the designer said he was “not so sure [he] wanted to sell in the end,” a spokesman for Clessidra SGR SpA said Wednesday that Cavalli has signed a letter of intent with the Milan-based private equity fund for the sale of a minority stake in the house. A deal could be finalized by the end of September, said the spokesman. However, he declined to comment on the terms of the agreement.

The designer did not return calls seeking comment, but a Cavalli spokeswoman said Clessidra and the designer are negotiating the sale of a 30 percent stake in the company. Previous reports pinned the stake at 20 percent.

The deal with Clessidra would help Cavalli develop his business without turning to banks — which is important in light of short-term debt of 21 million euros, or $30.8 million, Roberto Cavalli SpA has with several banks. The company’s debt has grown from 9.1 million euros, or $12.4 million, at the end of 2007, according to the company’s balance sheet obtained by WWD. Dollar figures are converted from euros at average exchange rates for the periods to which they refer.

The balance sheet shows Cavalli’s net profit in 2008 dropped 90.6 percent to 822,922 euros, or $1.2 million, from 8.8 million euros, or $12 million, in 2007. Sales inched up 1 percent to 112.9 million euros, or $166 million, from 112 million euros, or $153.4 million.

In the report, the company said 2008 was “marked by an uncertain global economy that morphed into a real financial and economic crisis in the second half of the year.” The firm, “while having a high-profile customer, is not immune to the contraction of consumer demand globally, which has extended to all product categories and geographical markets,” said the report. Sales in Italy dropped 13 percent to 27 million euros, or $39.6 million, while sales outside the European Union grew 11 percent to 57.5 million euros, or $85.5 million.

Cavalli’s earnings before interest, taxes, depreciation and amortization sank 80.5 percent to 4 million euros, or $5.9 million, from 20.5 million euros, or $28 million, the year before. The drop could partly stem from unpaid royalties from Ittierre SpA, which produces and distributes the Just Cavalli line under license. Ittierre filed for the Italian equivalent of Chapter 11 bankruptcy protection in February. The brand is Ittierre’s biggest license, generating 2007 revenues of about 240 million euros, or $329 million. Other Ittierre licenses include C’N’C Costume National, Galliano, VJC Versace and Versace Sport. Cavalli has claimed he was owned 20 million euros, or $26.5 million, in unpaid royalties by Ittierre.

Cavalli confirmed in the financial filing that it was evaluating the idea of selling a minority stake to an investment fund.

The arrival of Clessidra may lead to the appointment of a chief executive officer, and the buzz here is that a roster of potential candidates to the post include Michele Norsa, ceo of Salvatore Ferragamo; Gian Giacomo Ferraris, ceo of Jil Sander; Stefano Sassi, ceo of Valentino Fashion Group, and Giancarlo Di Risio, who is expected to leave Versace soon. A source said the latter may “make sense” given Di Risio’s past role as Ittierre’s ceo and contacts with Cavalli.

Looking ahead, the company said in the report it is focused this year on expanding in emerging countries and those where the brand is still not widely present, while consolidating sales with existing retail customers. Cavalli also said it expects “a slight drop in sales” in 2009 in light of its performance during the first few months of the year.