By  on May 5, 1994

MILAN -- GFT might not be so mad about Plaid.

As speculation mounted here this week that the deal for Plaid Clothing Group to acquire GFT might be running into problems, another name has resurfaced as a possible suitor for the Italian designer label producer.

Gemina SpA, an Italian holding company controlled by the Agnelli family's Fiat SpA industrial group, had been mentioned earlier as possibly interested in buying GFT, but this week its name was again being cited by sources close to the company.

On Wednesday, Gemina formally said it had no interest in GFT, as did a sister company, Fila SpA, an Italian sportswear maker controlled by Gemina and listed on the New York Stock Exchange.

Nevertheless, one GFT source said Gemina has, in fact, reemerged as a viable alternative to Plaid, which is currently conducting due diligence on GFT and is seeking to buy the company for $242 million (400 billion lire).

Speculation that Gemina/Fila might be GFT's latest suitor intensified after news surfaced that Plaid's bid might have run into a serious hurdle. As reported, Plaid made a special request to GFT's creditor banks to extend its exclusive right to negotiate with GFT beyond May 15, the deadline established in Plaid's March 9 letter of intent.

GFT's Italian creditor banks reportedly agreed to the extension, but on the condition that Plaid delete the "price adjustment" clause in the letter of intent that allows Plaid to modify its offering price after completing due diligence.

Although sources familiar with the talks have indicated that the Plaid-GFT negotiations are proceeding normally, others say that a GFT-Gemina marriage might make more sense.

For starters, there is mounting speculation that an Italian buyer would be more acceptable to everybody involved -- from the Rivetti family (which controlled GFT until it slipped into the hands of the banks) to current GFT management to Mediobanca, the Milan merchant bank that is masterminding GFT's financial rescue.

Some observers argued, however, that such a nationalistic approach isn't realistic in what has become a global business. Furthermore, one Italian group, the neighboring Miroglio, pulled out last year after taking a closer look at GFT's balance sheet.Still, some sources said GFT has reservations about Plaid's relative inexperience in the designer business and point out that Gemina would be more likely to leave GFT's operations in the hands of current management.

Also, GFT is reporting better figures lately, and some observers note that the manner in which Mexican entrepreneur Fabio Covarrubias was sent packing in March -- edged out by Plaid just when he had almost clinched an agreement -- appeared to be a maneuver on GFT's part to buy more time.

When Plaid -- an American-based tailored clothing company with financial roots in the Mideast -- stepped into the picture, it quickly secured exclusive negotiating rights in order to avoid the same fate as Covarrubias.

The ties between the two Italian groups -- GFT and Gemina -- and the families involved are noteworthy. Both the Rivetti and the Agnelli families (Gianni Agnelli is the charismatic chairman of the Fiat industrial group, Italy's largest private-sector corporation) are established industrial families from Turin.

However, the relationship that might really have sway in a possible GFT-Gemina deal is that of Italy's famous financial "salotto buono," or "inner sanctum," which includes Italy's preeminent industrial dynasties (Agnelli, Pirelli, Ferruzzi, to name a few) and where the secretive Mediobanca still pulls the strings.

Mediobanca is a long-term financial adviser to Fiat and one of the group's core shareholders. Fiat, in turn, is the controlling shareholder at Gemina.

Gemina acquired the struggling Biella-based Fila in 1988 and has staged a remarkable turnaround for the sportswear group, which it brought to Wall Street last year. Such a track record on Fila could bode well for GFT, observers say.

Furthermore, Maurizio Romiti, the son of Fiat's managing director, Cesare Romiti, is a director at Mediobanca with responsibility for overseeing the GFT bail-out.

Finally, GFT managing director Clemente Signoroni is a former Fiat executive whose appointment to GFT last year was smiled on by Mediobanca.

One financial analyst familiar with Fiat described a Gemina purchase of GFT as "very plausible." He also speculated that Fiat "may be considering a capital increase" to fund an acquisition and that its denial of interest in GFT is not unusual at this point, because it is a public company and is limited by disclosure laws.Nonetheless, the deal is proving especially hard to close. As Covarrubias put it only a few weeks before he lost out to Plaid, "This deal isn't done until it's done."

Plaid officials could not be reached for comment Wednesday.

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