MILAN — There will be a true mix of fashion and finance on the Milan stock exchange today.
Valentino Garavani will lead a lavish ceremony at the exchange to mark the start of trading in shares of the new Valentino Fashion Group, which will be valued at close to $1 billion. The events will include a show of 30 vintage Valentino gowns as well as videos tracking the company's history.
The designer is expected to ring the opening bell.
As reported, Marzotto is spinning off Valentino, a controlling stake in Hugo Boss and other clothing assets into the new Valentino Fashion Group. Investors will receive one Valentino Fashion Group share for every Marzotto share they hold. Shares will commence trading at 21.51 euros, or $25.95, per share, Marzotto's closing price on Thursday.
Valentino Fashion Group will be listed in the blue chip segment for companies with a market capitalization of 800 million euros, or $925.3 million, or more.
For Valentino, it marks the third change in ownership of his brand since 1998, when he and his business partner Giancarlo Giammetti sold the company to the now-defunct Holding di Partecipazioni Industriali for $233 million. Garavani shed tears at the press conference to announce the deal.
Valentino languished in the red under HdP, which also owned the once mighty GFT manufacturing company, and Marzotto bought the designer company in 2002 for $210 million (including Valentino's net debt of $179.2 million). The deal included lucrative contracts for Valentino and Giammetti.
The designer and Marzotto were both mum on whether he or Giammetti will hold shares in the new Valentino Fashion Group. But both sides have again refuted speculation that Valentino was preparing to step aside for a new designer at the house.
"I don't intend to stop," Valentino stated after presenting a Capri-themed men's spring-summer collection here on Wednesday. Photos of Garavani in his younger days splashed across a large screen for the show's finale, prompting some to question whether the designer was preparing his last runway bow.
Garavani said that's not the case. He's just nostalgic for the Seventies days of jet setting. "All of us Roman playboys were there," he said.Michele Norsa, chief executive officer of Valentino Fashion Group, also denied the company is looking for a replacement for the 73-year-old designer, stressing it's not something the new publicly traded company is worrying about for the moment. He wouldn't disclose the expiration date for Valentino's contract, but Norsa noted that Marzotto has been working to strengthen the design team surrounding Valentino, particularly for accessories — a category earmarked for future growth.
"Relations are excellent, contracts get renewed. We have a relationship that is exceptionally positive. It's not a question that we are asking ourselves right now," Norsa said.
Graziano de Boni, president and ceo of Valentino Inc. and Marzotto USA, added: "We turned around this company with Mr. Valentino. It wasn't a problem in terms of style, but of business."
Norsa said he thinks the Valentino Fashion Group will appeal to the market as a diversified and balanced way to invest in fashion, noting a melange of products ranging from couture to a sportswear clothing line licensed from a cigarette manufacturer (Marlboro Classics).
Valentino's other big license is for the diffusion line M Missoni.
"We cover a very wide product range that I think makes this company relatively safe from the market's point of view and in terms of our product offering," Norsa said in an interview at Valentino's headquarters. "It's less vulnerable than a company that is exclusively luxury or low-end."
Marzotto, which started out as a wool mill in 1836, 25 years before Italy was unified as a country, made its first fashion foray when it bought Hugo Boss in 1991. Over the years, it inked licensing deals for diffusion lines like M Missoni and Gianfranco Ferre (the Ferre agreements have since ended). The company also expanded in emerging markets by buying textile companies in Lithuania and the Czech Republic.
Since buying Valentino, Marzotto has said it wants to focus on fashion. It's been diversifying out of the less lucrative textile industry and shifting production of some fabrics out of Italy to countries with cheaper labor such as those in Eastern Europe.
Norsa and de Boni explained that the logic of the spin-off is to exalt the fashion and luxury component of Marzotto while shedding a bit of its old image as a manufacturer. Marzotto SpA will retain control of the textile operations that gave the group its start some 160 years ago but have also weighed on its balance sheets in recent years."We will resemble more of a luxury group," said de Boni.
Based on 2004 numbers, Marzotto said Valentino Fashion Group's sales for that year would have risen 5 percent to 1.55 billion euros, or $1.92 billion at exchange rates from that period. The unit would have posted a gross operating profit of 237 million euros, or $293.9 million, and would have net debts of 423 million euros, or $524.5 million.
Norsa said it will be impossible to sustain Valentino's double-digit sales momentum without opening more stores. Currently there are about 35 freestanding Valentino boutiques in the world. This year the brand has opened in Venice, Capri, Istanbul and Abu Dhabi. Another 11 are destined to roll out by the end of the year in locations such as South Coast Plaza in Orange County, California, two in Germany and one in the Ginza district of Tokyo.
The company isn't disclosing what this retail expansion will cost, but Norsa said the Ginza store, due to open in early December, will be the "biggest investment we've made since we bought the company."
Norsa and de Boni said they are also studying potential locations for more U.S. boutiques and/or shop-in-shops depending on the locations they find. Chicago, Atlanta, Dallas, Houston, San Francisco and Boston are all contenders.
"We will move, based on the quality of the projects. We never took big risks to open where we weren't sure we would reach break even a in reasonable time period," he said.
Norsa wouldn't disclose current sales volumes for various product categories, such as the Valentino bridal collection made under license with Spain's Pronovias Society, or diffusion line Valentino Red. But Norsa said overall he's very encouraged with results so far.
Valentino Red, launched in 2003 through a licensing pact with manufacturer SINV Spa, in particular has widened the designer's customer base, de Boni said. Nordstrom, Saks Fifth Avenue and specialty stores like Intermix and Fred Segal carry the line, as well as some Valentino stores.
De Boni said that retailers offering a mix of Valentino accessories and Valentino Red apparel have helped win over "a much younger clientele who ... wouldn't necessarily go to our stores."As for M Missoni, Norsa said that sales of the line will grow more than 30 percent this year.
De Boni said that the line has a style content that positions it between bridge and contemporary in the U.S., and he hopes to round out the brand's offering with more pieces to expand the brand beyond knitwear.
"There's a collection of M Missoni handbags that is very cute and eventually we will launch in the United States," he said.
The list of Valentino Fashion Group marks the biggest fashion-related development on Europe's stock markets since last year's delisting of Gucci Group — a consequence of PPR's buyout of the company.
Tod's and Mariella Burani Fashion Group listed shares on the Milan stock exchange in 2000, breaking ranks with the Italian tradition of remaining closely held family-managed companies. Geox, a footwear company that prides itself on breathable shoe soles, is the only other company with even the most remote fashion affiliation to approach the stock market recently. It began trading last year.
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