By  on September 6, 2006

HAMBURG, Germany — Jil Sander AG is entering a new era as a private company.

The fashion house's shareholders met here Tuesday and approved a "squeeze out" plan that would delist the company from the Frankfurt and Hamburg stock exchanges and lift London-based private equity group Change Capital to 100 percent ownership from its current stake of 98.5 percent. The equity group bought Jil Sander from Prada Group in February.

Meanwhile, speaking on the sidelines of the meeting, Jil Sander chief executive Gian Giacomo Ferraris outlined a series of strategic objectives for the brand. They include the opening of two flagships, in Rome and Frankfurt; devising a new store concept with creative director Raf Simons; reorganizing the brand's accessories business, and tapping into the underexploited potential of products like fragrances and eyewear.

"It's all coming together," Ferraris told WWD. Now that restructuring efforts are complete and Jil Sander will have the flexibility to operate as a privately held company, he said it's time for "clear, concrete development."

Ferraris, who flew to Hamburg from South Korea and will depart for Japan on Thursday, is working on bolstering the brand's Asian presence. Three Jil Sander shop-in-shops open in Japanese department stores this week.

Elsewhere on the retail front, flagships will open in Rome at the end of September and in Frankfurt at the beginning of next year, bringing the total number of freestanding stores in the world to 23.

Jil Sander is also rethinking its store locations in London, where the company shuttered its flagship last year, and in Paris, as it prepares to revamp its whole retail look. While a new store concept is in the works, but Ferraris said it's too soon to estimate when it will bow.

"Raf Simons is in our company, [and we want to develop] the new store concept with him," Ferraris said.

Retail aside, Ferraris and chief financial officer Armin Mueller said they want to develop a stronger royalty stream from licensed products. The executives said they are happy with beauty licensee Coty, but they want to work with their partner to boost visibility and sales of Jil Sander fragrances, especially in the duty free channel."You should be able to buy [those products] everywhere, and we are not there yet," Mueller said.

On the aspirational product front, Ferraris and Mueller said they would like to strike a new license for eyewear, since the brand's former agreement with Luxottica ended last year.

Jil Sander is also looking to boost its accessories business. Ferraris said the manufacturing chain for handbags and other leather goods, which had been managed by Prada until now, has been reorganized so that Jil Sander has a direct relationship with its Italian producers.

Ferraris said that sales of accessories, which currently generate 15 percent of sales, should make up about 30 percent in two years.

Under the terms of the buyout deal, Change Capital's Luxembourg-based financial vehicle Violine Sarl will buy up the remaining 1.5 percent of Jil Sander it doesn't already own and consisting entirely of preference shares devoid of voting rights. Violine is offering 347.94 euros, or $445.36, per share, a total outlay of 1.3 million euros, or $1.7 million.

The squeeze-out price reflects a premium of just over 14 percent on management's current valuation of the company. Mueller told shareholders that management had determined Jil Sander AG to be worth 65.8 million euros, or $84.6 million. The squeeze-out price values the company at 75.14 million euros, or $96.6 million.

These figures shed new light on the business, because the price Change Capital paid Prada to buy Jil Sander wasn't disclosed back in February. Mueller said during the meeting that Jil Sander management was unaware of the price stipulated between Change Capital and Prada, but that it was "lower than the price [being offered] in the squeeze out," defying earlier estimates that Change paid 100 million euros, or $128 million, for Jil Sander.

Still, some minority shareholders in Germany expressed their dissatisfaction with the squeeze-out price, filibustering the shareholders' meeting into a 12-hour event. They questioned everything from financial footnotes to the costs of simultaneous language translation at the meeting, held at a hotel in the same neighborhood as founding designer Jil Sander's lakefront estate.

The timing of the squeeze out and share tender to Violine has not yet been determined. It will depend on how long it will take the German courts to process minority shareholders' objections.As Jil Sander and Change Capital executives explained the terms of share buyout and the critera used to value the company, they released new financial forecasts, showing sales for the current financial year growing 11.5 percent to 145 million euros, or $186.5 million, and reaching 188 million euros, or $241.8 million, in three years' time. Gross margin is seen rising from 46.2 percent last year to 49 percent next year and 52.5 percent in fiscal 2009-2010.

Executives reiterated their goal to break even on an operating level before interest, taxes, depreciation and amortization this year, although the company hasn't set a timetable for generating a profit on a net level.

Stephan Lobmeyr, chairman of Jil Sander's supervisory board and a representative of Change Capital, said it was too soon to determine whether Change will relist Jil Sander on the stock exchange or sell the company to another investor in a few years. Change has said it considers the fashion house a three- to five-year investment.

To continue reading this article...

To Read the Full Article
SUBSCRIBE NOW

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus