By  on July 5, 2007

MILAN — European private equity group Permira Holdings is one step closer to owning 100 percent of Valentino Fashion Group SpA.

Permira's takeover vehicle, Red & Black Lux Srl, has struck a deal to buy 18.95 percent of VFG from Canova Partecipazioni SrL, a group of financial investors that includes VFG chairman Antonio Favrin.

The Canova deal, pending antitrust approval, would lift Permira's total VFG stake to 60.2 percent. As reported, Permira has secured majority control of VFG through a series of deals with members of the Marzotto family, the company's former owners.

The Canova deal raises questions about the future of Favrin and whether he will stay at VFG under new ownership. As reported, Favrin and Carlyle Group were attempting a rival takeover bid for VFG, but ultimately lost to Permira. Favrin's relationship with the Marzotto family, who controlled VFG, was already strained before he challenged them with his own bid, sources say. Now it will be Permira's call.

"When Permira decides, we will know [whether or not Favrin will stay on as chairman]," a VFG spokeswoman said Monday. Favrin could not be reached for comment and Permira declined to comment on its strategy for Valentino or its plans for management, citing the ongoing takeover process.

Permira is looking to buy out minority shareholders and delist VFG from the Milan Stock Exchange. It is offering all VFG shareholders 35 euros a share ($47.41 at current exchange), the same price Permira paid for the stakes owned by the Marzotto family and Canova.

The Red & Black tender offer could start as early as the last week of July and run through the first week of September.

Permira already has its hands on another 12.4 percent stake in VFG, thanks to a deal stipulated last month. One Marzotto family investment vehicle, Tidus, opted out of a straight sale. Instead, it issued convertible bonds to Red & Black. The investment group can convert those bonds into VFG shares, but not until December at the earliest, which would be long after Red & Black executes its tender offer for the remaining shares traded on the Milan Stock Exchange.Red & Black's total price tag for VFG, should all shareholders adhere to its offer, would be about 2.6 billion euros ($3.52 billion). But the expenses won't stop there. Red & Black will also launch a cascading bid for all outstanding shares in Hugo Boss AG. VFG owns 50.9 percent of Hugo Boss, which is listed on the Frankfurt Stock Exchange.

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