By  on May 2, 1994

MILAN -- Simint U.S.A., which operates the A/X Armani Exchange business, might soon have a new owner, whose identity is still a secret.

The board of Simint's Italian parent, Simint SpA, has examined an offer to buy full control of the U.S. operation, and a deal "could be concluded shortly," Simint said last week.

The sale could contain losses to an estimated $9 million to $12.5 million (15 billion to 20 billion lire), a figure that would be "considerably lower than the losses that would have, in any case, burdened the company for at least the next two earnings periods," Simint said in the statement, without further clarification.

Simint did not disclose the potential buyer, who reportedly is represented by J.P. Morgan, a New York securities firm.

Officials at Giorgio Armani SpA, which effectively controls about 40 percent of Simint, were not available for comment.

In an interview Thursday before the Simint statement was issued, Giorgio Armani himself declined to disclose details about his plans for Simint until an overall restructuring plan is completed.

Although Simint had stated earlier it was looking for an American partner, this was the first time the company acknowledged its intention to sell off the U.S. operation. It was not clear what would become of the A/X business, although Armani indicated in the interview that he would continue to design the Armani jeans line, which is produced by Simint SpA.

The jeans line is distributed in the A/X stores, as well as through wholesale distribution in Europe and elsewhere around the world.

As reported, Giorgio Armani, along with his sister, Rosanna Armani, bought out a 22 percent stake in Simint owned by Milan financier Francesco Micheli when Micheli pulled out of the company earlier this year, due to the high costs and growing losses generated by the U.S. operation.

Armani and his sister together now control nearly 40 percent of the company and are the single largest shareholder group. An additional 10.2 percent is held by Milan investment bank, Sige, while the rest is traded on the Milan stock market.

Although the Simint statement did not disclose any new financial results, the latest figures reported in February showed a consolidated loss of $8 million (12.87 billion lire) in the six months ended Oct. 31, 1993; Simint USA lost about $8.8 million (approximately 14.1 billion lire) in the half.Simint further announced that an extraordinary shareholders meeting has been set for June 15, to address the company's financial problems. Shareholders will be asked to approve a plan to wipe out the company losses by using reserves and a possible writedown of the share capital. In addition, they will be asked to approve a capital increase of up to $31 million (50 billion lire) to reconstitute Simint's capital base.

The statement also said Simint's core shareholders have already transformed credits in the amount of $29.2 million (47 billion lire) into subordinated loans. Furthermore, the Simint board approved a comprehensive industrial and organizational restructuring plan that calls for a significant "downsizing of the group, both in terms of revenues and human and technical resources."

However, the company said the downsizing could be temporary if future development prospects are realized. Simint added that it was in talks for an "important" licensing contract that could replace the Moschino license, which, as reported, expires with the spring-summer 1995 collection. Simint makes the Moschino jeanswear.

In a separate development Friday, Milan stock market authority Consob suspended trading indefinitely in Simint shares, pending a closer analysis of whether the Armanis' acquisition of Micheli's shares would trigger a public tender offer.

Although Giorgio and Rosanna Armani, by splitting the acquisition, technically remained under the limit that would require a public tender offer, Consob is studying whether their de facto control of more than 25 percent of Simint shares could trigger the regulation anyway.

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