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Cavalli Confirms Talks to Sell Minority Stake

Designer says he's "hopeful" of a deal to sell up to 20 percent to private equity firm Clessidra.

MILAN – Roberto Cavalli has confirmed he is in talks to sell between 15 and 20 percent of his namesake fashion label to private equity firm Clessidra SGR SpA.

“We are still at the beginning [of negotiations], but I am hopeful,” Cavalli said on the sidelines of his fall-winter show here on the second day of men’s fashion week. “I need a serious financial partner… [Clessidra] is a well-managed Italian group. I hope they will help grow my company.”

He declined to give more details.

As reported, the Italian designer told a local business daily last week he was close to signing a preliminary deal with Clessidra and that he would like to list on the stock market in three or four years.

Sources close to the deal said the parties had been speaking on exclusive terms for some time.

Cavalli has frequently voiced an interest in selling a chunk of the company 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 called off an auction last July because of market conditions, saying valuations of his business of around 800 to 900 million euros, or $1.05 billion to $1.19 billion at current exchange, fell short of his expectations and that he would not revisit a sale before 2009.

He was understood to have valued his company, which he set up more than 40 years ago, 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 near to 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.