BERLIN — Megha Mittal, the 33-year-old daughter-in-law of billionaire steel magnate Lakshmi Mittal and representative of the Mittal family, has won the bid to take over the insolvent German fashion house Escada.
This story first appeared in the November 6, 2009 issue of WWD. Subscribe Today.
Late Thursday, the Escada insolvency administrator said a sale and transfer agreement had been signed with a Mittal family trust, transferring all key assets of Escada AG’s operative business as well as shares in Escada AG’s subsidiaries. Mittal represents the family, which holds a large stake in leading steel company ArcelorMittal, and has a separate family office in London that operates like a private equity fund.
The transaction, financial deals of which were not disclosed, provides for a transfer of Escada’s business operations, including employees, worldwide brand rights, production facilities and sales and distribution structure.
Escada chief executive officer Bruno Sälzer will remain at the helm of the company.
“Our first priority is to ensure that the great heritage of this iconic company is translated into a strong and successful future,” Mittal stated. “Despite recent difficulties, Escada has the potential to redefine its place in the world of luxury brands and become synonymous with fine quality and elegance. I am confident that, under the leadership of Dr. Bruno Sälzer, we have the right team to achieve this.”
Mittal will take a seat on the Escada board and is to be involved in promoting the brand.
She is said to support the turnaround policies and structural realignment Sälzer instituted since coming on board in July 2008. These include tightening the main collection, lowering prices by about 15 percent, putting brand managers in place to head up the design teams and pushing ahead with the development of Escada’s second line, Escada Sport.
The wife of Aditya Mittal, chief financial officer of ArcelorMittal, Mittal is a Wharton Business School graduate, former Goldman Sachs investment researcher, architectural design postgraduate, mother of two and a fashion enthusiast. She won out in the final round of bidding for the German fashion house against an international consortium supporting Sven Ley, son of Escada founders Wolfgang and Margaretha Ley; his wife, Zoe, and an unconfirmed third party, widely believed to be the M1 Group, the Beirut, Lebanon-based financial holding firm that owns Façonnable, among other holdings.
A source close to the Mittal family told WWD, “As this involves a family office, there is no pressure to see quick returns [on the investment]. This is a long-term commitment.”
Escada filed for insolvency in August after its bond exchange offer failed, ultimately derailing the cash-strapped company’s financial rescue plan. Insolvency is the German equivalent of Chapter 11 bankruptcy.
“I am relieved for our employees, customers and suppliers that the time of uncertainty is finally over,” said Sälzer. “We have found our ideal partner in the Mittal family. Now all that counts is to look forward.”
Christian Gerloff, insolvency administrator of Escada AG, said, “To seal this complex transaction, numerous legal issues had to be clarified and steep hurdles had to be taken. I am all the happier that, within a mere two-and-a-half months after filing for Escada’s insolvency, negotiations have come to an attractive and sound result for the creditors.”
The last published figures were for the second quarter of fiscal 2008-09 ended April 30, with sales of about 68.2 million euros, or $88.8 million, for the period, and a pretax loss of 16.3 million euros, or $21.2 million, for the Escada business unit, compared with a pretax profit of 3.5 million euros, or $4.6 million, for the period a year previously.
Sales for the first six months of the fiscal year were about 150 million euros, or $196.6 million, converted from the euro at an average exchange rate for the period.