Through the New York-based fund’s total contribution of 210 million euros, or $287.7 million at current exchange, Versace now has the means to fully develop the brand around the world, said Ferraris, leveraging the signature label’s “hot moment” now. The ultimate goal, he noted, is to publicly list the firm in three to five years.
The deal was struck between Blackstone and Gianni Versace SpA, which is entirely controlled by GiVi Holding. Blackstone will own 20 percent of Versace SpA, with GiVi Holding maintaining the balance.
Following the deal, Blackstone will inject 150 million euros, or $205.8 million, of fresh capital into the company and will acquire 60 million euros, or $82.3 million, in stock from GiVi Holding SpA.
Allegra Versace Beck will retain a 50 percent stake, Santo Versace a 30 percent stake and Donatella Versace 20 percent in GiVi Holding. The Versaces’ stakes will not vary, as they will continue to own 100 percent of GiVi Holding and thus 80 percent of Versace SpA, since it was GiVi Holding that sold the Versace shares to Blackstone. It is understood that Versace SpA is the company that will eventually go public. RELATED STORY: Versace RTW Fall 2014 >>
The transaction is expected to be finalized in the spring and, upon completion, Blackstone will have one seat on the firm’s board. Donatella Versace will remain creative director of the company and Santo Versace will continue as chairman. Versace Beck, Donatella Versace’s daughter, who started taking her first steps in the design office last year, will remain a board member.
“I am very pleased to work with Blackstone and, in particular, with [chairman, ceo and cofounder] Stephen Schwarzman, whom I admire for his achievements and who shares the family’s vision for the development of Versace,” said Donatella Versace. “We have gained a strong and unique positioning in luxury fashion, and I believe that this investment in the company, together with our clear direction and our outstanding management team, will enable us to achieve Versace’s potential.”
This is the first foray into luxury for Blackstone, which recently has invested in Crocs Inc. In November, RCS MediaGroup, which publishes Italy’s daily Corriere della Sera, sold its storied offices in the Brera district to The Blackstone Group International Partners LLP. In July, surfwear firm Billabong International Ltd. received an alternate financing option from investors led by Altamont Capital Partners that included the Blackstone Group’s credit arm, GSO Capital Partners.
Armando Branchini, deputy chairman of Milan-based consultancy InterCorporate, did not see Blackstone’s lack of experience in the luxury sector as a problem. “This is purely a financial partner. After years of pruning, now Versace can really expand with new resources,” said Branchini.
In his opinion, Versace could have been valued at more than 1 billion euros in light of its “history, product range, growth potential, and brand awareness.” Versace’s valuation compares, for example, to Moncler, whose market value on the first day of trading in December analysts pegged at around 3.6 billion euros, or $5 billion, despite its focus on a seasonal monoproduct, the down jacket.
“In luxury, the growth of sales and profitability is directly proportional to the number of stores,” said Branchini, underscoring Versace’s potential in retail. “The range of products Versace offers will allow the company to easily assort its stores.”
The first significant opening for the brand is a sprawling boutique in the prestigious Galleria Vittorio Emanuele II in Milan by this summer. Other relevant openings include units in Hong Kong, Istanbul, Rio de Janeiro and Moscow, in addition to other key locations in China, South Korea and North America.
Ferraris said that Versace has 137 stores worldwide and that the plan is to reach more than 200 units in 2016 in both established and emerging markets. He characterized the year 2014 as a turning point, with the company “winding up” through “big investments.”
Luca Solca, managing director, global luxury goods, at Exane BNP Paribas, said the deal is “potentially interesting” but wondered at the same time whether a new investor could be influential with a minority stake. Solca conceded that Versace “can count on a strong brand awareness, but it needs to become more relevant to luxury goods consumers” and was cautious about the group’s retail strategy. “I can see that a limited number of stores can be an issue for newer brands such as Moncler and Brunello Cucinelli, but not as much for a storied label as Versace. We’ve seen in the past that opening boutiques does not necessarily translate into a growth for the brand,” said Solca, remembering how that strategy did not pay off at Yves Saint Laurent in the Domenico De Sole and Tom Ford era.
Conversely, Stefano Corneliani, director of luxury and consumer goods at Intermonte Corporate Finance, said that investing in a comprehensive chain of stores is the “mantra” of luxury brands. “There are no alternative strategies in emerging markets, and these are capital intensive ventures,” said Corneliani. Like Branchini, he was “not surprised by the value” projected on Versace. “Actually, they could have even been more generous,” he said.
A luxury analyst who spoke on condition of anonymity wondered about the reasons for Blackstone agreeing to take only a 20 percent stake. “This could simply be a first foot in the door, aiming at a bigger stake further down the road, if the company doesn’t go ahead with the initial public offering, for example,” said the analyst.
Whatever the implications, an upbeat Ferraris said during the interview said that Blackstone was chosen because its vision perfectly matched that of Versace’s shareholders. “A year and a half ago, the Versace family and the company’s management clearly outlined its strategies [for a sale], with the owners retaining a majority stake, expanding the brand and launching an initial public offering in three to five years,” said Ferraris. “Blackstone entirely agreed on these strategies.”
“It is a great pleasure to be working with a true icon in Donatella Versace. She has a unique position in the fashion world and has helped make Versace one of the few global, luxury fashion brands,” said Schwarzman.
Versace will release its full 2013 results at the end of March, but it expects to report a 50 percent gain in earnings before interest, taxes, depreciation and amortization to reach at least 69 million euros, or $94.5 million. Also, revenues are forecast to climb 18 percent to 480 million euros, or $657.6 million.
Ferraris pointed out that the U.S. market has shown the biggest growth for the past three years, and that like-for-like sales in 2013 were up 29 percent compared with the previous year.
The executive said he hoped to reach global sales of 800 million euros, or $1.09 billion, in three years.
Versace will leverage the strength of its signature line, which in 2013 represented 60 percent of sales, thanks to “Donatella Versace’s energy and creativity,” said Ferraris.
Also, he touted the potential of the Versus brand, now a seasonless collection and with a strong digital element, whose production was taken in-house two years ago. “This is the second growth driver,” he explained. Ferraris also expects the agreement to contribute to a boost of Versace’s product offering, with a specific focus on accessories, and to enhance its e-commerce business.
Rumors about a possible sale of Versace emerged in 2012 when the group tapped Goldman Sachs and Banca IMI to evaluate growth opportunities. Blackstone was one of the three investors that made the short list, together with global private equity firm CCMP and Investcorp, according to market sources.
Since he arrived at the company in 2009, when he launched an extensive reorganization plan, Ferraris has nearly doubled the company’s size and said this deal acknowledged the work done. In 2012, he set in motion important projects, such as e-commerce, new beachwear and innerwear lines, the Young Versace collection and Atelier Versace — and invested in growing Hong Kong, China, Malaysia, the U.S., Europe and Brazil. The executive has been capitalizing on investments made over the past few seasons in its production platform in Novara, Italy.
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