By and  on September 13, 2006

MILAN— Diesel owner Renzo Rosso is said to have another quirky design house in his sights: Viktor & Rolf.

The fashion maverick — who already owns Martin Margiela and produces the Dsquared line, as well as his denim giant Diesel — is in negotiations with Viktor Horsting and Rolf Snoeren about a possible deal, which could involve buying all or part of their company, according to sources. Talks are said to be at an advanced stage, although a final price has yet to be agreed upon.

Several other hurdles to a final deal remain, however, and the talks still could break down.

Rosso — who is holding his Diesel show in New York today and reopening the denim brand's New York flagship on Union Square tonight (for more on the store, see page 18) — declined comment on Tuesday. A spokeswoman for Viktor & Rolf denied any deal had been completed, saying, "All the rumors and speculation involving any acquisition of Viktor & Rolf by Renzo Rosso of Diesel are completely untrue and unsubstantiated."

Horsting and Snoeren could not be reached for comment.

The Dutch designers have a complicated business arrangement under which they own 100 percent of their design house, but only 50 percent of the company that owns their trademark, which is called Brand Co. The remainder of Brand Co. is owned by Italian fashion manufacturer Gibò. Franco Penè, chairman of Gibò, denied any knowledge of a Viktor & Rolf acquisition by either Rosso or Diesel.

"On our end, we have had no contact with Diesel," said Penè. "We are not negotiating with Diesel."

Penè said he had the right to buy the designers' 50 percent stake at the same price and terms of a competing offer.

Penè said he hasn't spoken to the designers personally since the end of July, but that professional contact between Gibò and Victor & Rolf, through the designers' staff, remained normal, occurring on a daily basis.

Still, a deal involving Viktor & Rolf — which is said to have global apparel revenues of about 10 million euros, or $12.7 million — would not be out of character for Rosso, who has expanded his business in recent years by linking with quirky fashion labels. Rosso's Only the Brave Srl — the umbrella company that controls Diesel, high-end fashion manufacturing company Staff International and Maison Martin Margiela brands — is one of Italy's biggest fashion companies. Sales last year climbed 10 percent, to 1.1 billion euros, or $1.4 billion at average exchange rates for the period. The business is based in Molvena, a small town in the hilly Veneto region.Rosso, one of premium denim's pioneers, has expanded the Diesel brand into a revenue powerhouse beyond jeans to encompass accessories, children's apparel, jewelry, watches, eyewear and other products. But ever a man of contrasts, he recently expressed some concerns over the size and penetration of the Diesel brand.

He's now focusing on boosting the brand's cachet with pricier items, including $1,000 leather jackets from the more exclusive Diesel Denim Gallery collection, and fighting over saturation. In the last five years, Diesel has slashed worldwide distribution of the main collection to 4,500 doors from 10,000. Most cuts were at the department store level in the U.S. and Europe. Earlier this spring, Diesel relocated one of its London shops and one of its Paris shops to more prestigious locations, on Bond Street and the Left Bank's Rue de Grenelle, to attract a better-heeled clientele.

"Today, in fashion, it's better to be considered a cool, individual and fresh company than a really big brand," Rosso told WWD in June. "I wish Diesel would become smaller," he said, exasperated. "I always put myself in the shoes of the consumer because when I read that a brand does one billion, two billion [euros a year], I think, ‘Wow, that label is so massive.'"

Rosso is eager to build his profile in the U.S. He recently signed a deal to buy a 12-story, 120,000-square-foot building at 220-230 West 19th Street (between Seventh and Eighth Avenues) in New York to "offer more visibility to the group's products and to further grow and strengthen its American operations."

The building will become the new headquarters for Diesel USA Inc., quadrupling the company's existing office space in New York. For the first time, all the brands will be united under the Only the Brave umbrella.

Rosso strengthened his ties to the Milan catwalks by signing a deal in 2001 to produce and distribute the line Dsquared, designed by founding duo Dean and Dan Caten. The pact runs through 2011.

Dsquared's sales were 70 million euros, or $88.2 million, in 2005, a considerable jump from the 3.5 million euros, or $4.6 million, the brand posted in 2001.In June, Rosso declined to delineate strategic objectives at Dsquared, saying the future of the brand depends on the label's owners, the Caten brothers. He did add that the line, known for its steamy and sporty take on low-rise jeans and sleeveless shirts, is selling well.

In 2002, Rosso bought a majority stake in Martin Margiela, a Belgian designer known for his Greta Garbo media profile, stores that are painted all white — even the hangers — and such offbeat styles as cleft-toed boots and stuffed-snake scarves. He has invested more than 15 million euros, or $19.2 million, in developing the brand, which is known for its artsy edge and cult following.

Margiela posted sales of 32 million euros, or $41.3 million, last year, but Rosso said the brand could generate as much as 100 million euros, or $129 million, in revenue within five to seven years. In July, a Margiela store will open in Hong Kong, rounding out a retail network of 12 freestanding stores around the world.

"[Whether it's] 70 or 100 million [euros in sales] is not important. What is important is that it remains cool and that there's the right development for this brand. I don't want to have sales points that aren't correct for the brand," he said.

Horsting and Snoeren are acclaimed for their conceptual and witty approach to fashion. Childhood friends, they started collaborating after graduating from Holland's Arnhem Academy, initially taking an art-based approach that didn't always garner much attention.

The designers were once so frustrated with the lack of notice they received from the press that they staged a strike in lieu of a collection — plastering Paris with posters announcing the fact.

They catapulted onto the international fashion scene in 1998, when they started showing during Paris Couture Week, mounting spellbinding shows featuring clothes shaped like atomic-bomb clouds, decorated with foot-deep ruffles or covered in thousands of bells. For their "Russian Doll" collection from 1999, the designers dressed tiny Maggie Rizer in nine layers of crystal-studded finery until she was as big as a sofa and had her rotating on a turntable.

In recent years, they've layered on more serious business components, launching ready-to-wear in 2000, men's wear in 2003 and a signature fragrance, Flowerbomb, with L'Oréal in 2004.Last year, the duo introduced a lingerie collection and signed on as designers of Allegri, the Tuscan rainwear and outerwear specialist. And this winter, they are collaborating with Swedish fast-fashion giant H&M for a one-time collection. A men's fragrance, Antidote, is being launched this month after being unveiled in June at a Rufus Wainwright concert.

Last year, the designers opened their first freestanding store, a 750-square-foot unit on Milan's Via Sant'Andrea with an upside-down decor: parquet on the ceilings and chandeliers sprouting out of the floor.

But their showmanship and wry humor have kept the fashion industry rapt, and their Paris runway shows are invariably among the high points of the week.

Elements have included fog, black light and makeup, cinematic blue light technology and — for the launch of Flowerbomb — pyrotechnics.

In 2003, Viktor & Rolf was the subject of a 10-year retrospective at the Museum of Fashion and Textiles in Paris.

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