MILAN — Has Roberto Cavalli found an investor at last?
This story first appeared in the January 16, 2009 issue of WWD. Subscribe Today.
It appears so — if a deal said to be in the works is completed. In an interview with a local financial daily published Thursday, the Italian designer said he was “close to signing a preliminary deal” to sell up to 20 percent — and “no more” — of his namesake fashion label to Milan-based private equity firm Clessidra SGR SpA. He added he would like to list on the stock market in “three or four years.”
“I had to think hard about it over the last few weeks, and I believe that it is the right way to ride the recovery after this moment of international economic-financial crisis,” Cavalli told Il Sole 24 Ore.
A Cavalli spokeswoman would not confirm the report, while a spokesman for Clessidra declined to comment, in accordance with company policy. Sources close to the deal said the parties had been speaking on exclusive terms for some time. Cavalli himself did not return telephone calls.
“There are solid conversations going on,” a source said.
Cavalli called off an auction in July because of market conditions, saying valuations of his business fell short of his expectations and that he would not revisit a sale before 2009.
“I’m not selling for 800 to 900 million [euros, or $1.05 to $1.19 billion at current exchange],” the flamboyant, cigar-smoking designer said at the time. As reported, interested bidders then included Candover Investments, The Carlyle Group, Lion Capital Investments Group and Texas Pacific Group.
Cavalli was understood to have valued his company at 1.4 billion euros, or $1.85 billion at current exchange — almost 17 times earnings before interest, taxes, depreciation and amortization in 2007 of around 84 million euros, or $115 million at average exchange. At the time, luxury and fashion companies listed in Italy were trading on average on an EV/EBITDA multiple of nine. They are now trading at under seven times.
Industry sources said Cavalli had likely “dramatically reduced” his asking price to be on the cusp of reaching a deal. Based on his valuation last year, a 20 percent stake would be worth around 280 million euros, or $370 million, which sources said was “very demanding” given the economic climate.
“I don’t see how that could be confirmed,” one source said.
For some time, Cavalli has voiced his interest in selling a chunk of the company he set up more than 40 years ago in order to fund the next phase of growth internationally and to bring in new management. Cavalli relies on the Italian market, which is suffering, and the 68-year-old designer told WWD last year he wanted to dedicate his time “just to designing” because he had “too many things to do.”
Cavalli’s profile has grown significantly over the last few years after expanding distribution, opening more stores and, in 2007, linking up with H&M for a one-off collection, which created mania from Manhattan to Tokyo.
The markets speculated Thursday the possible deal with Clessidra might also have been precipitated by IT Holding SpA’s protracted sale negotiations with Mensun Ltd., which appear to have cooled. IT Holding, through its subsidiary Itierre SpA, is licensed to design, produce and distribute ready-to-wear and accessories for Cavalli’s secondary label, Just Cavalli, through 2010. In 2007, the deal contributed over a third of IT Holding’s revenues of 635.9 million euros, or $871.7 million.
In May, IT Holding chairman and chief executive officer Tonino Perna told WWD the Just Cavalli license would not be at risk should Cavalli sell a minority stake, saying he expected it to be “renewed automatically.” An IT Holding spokesman confirmed that position Thursday.
However, sources said the relationship would “definitely” come under scrutiny and that IT Holding’s future plans would need clarifying.
IT Holding, which also operates the VJC Versace, Versace Sport, Costume National C’N’C and Galliano labels under license, and owns the Gianfranco Ferré, Malo and Extè brands, said earlier this month it would explore alternatives to improve its financial situation, after deciding not to extend its exclusive terms with Mensun, which is owned by Chinese businessman Billy Ngok, beyond the end of 2008.
As reported, Clessidra, whose total capital amounts to 820 million euros, or $1.08 billion, according to its Web site, is believed to have approached IT Holding in May about acquiring a stake, although nothing was completed.