Strategy for Jil Sander: Buyer to Grow Brand, Sell It in 3 to 5 Years

Powered by the design talent of Raf Simons and its current management, the new owners of Jil Sander plan to launch the firm into expansion.

MILAN — Powered by the design talent of Raf Simons and its current management team, the new owners of Jil Sander plan to launch the company into an expansion mode.

Confirming an exclusive report in WWD Thursday, Change Capital Partners said it had acquired Sander from Prada Group for an undisclosed sum. The new owners have immediate plans to open three boutiques in Japan, find a replacement unit in London and bump up Sander’s U.S. business.

The London-based private equity fund, which is headed by Carrefour chairman and former Marks & Spencer chairman Luc Vandevelde, said acquiring more brands is a key facet of its future strategy.

At the same time, the deal represents the downsizing of one of the premier multibrand luxury groups assembled during the acquisition mania of the late Nineties. Prada Group is also said to be in talks to sell Helmut Lang, a money-losing business it recently shuttered.

Faced with a large amount of debt stemming from its acquisitions spree, and given its stop-and-go approach to an initial public offering, Prada Group has already sold stakes in Fendi and Church’s.

On Thursday, Change Capital’s managing director Steven Petrow praised Prada for restructuring efforts at Sander that should edge the brand to break even in fiscal 2006 on projected revenues of 140 million euros, or $166.6 million at current exchange.

Yet he admitted the Sander brand has long competed for management attention and resources within Prada Group — a problem it would not encounter under Change Partners.

“The turnaround is largely complete and now we’re planning for growth,” he said in a telephone interview. “We think significant growth is possible for this brand and it will continue to compete against the biggest names in the fashion business.”

Petrow would not discuss any figures, nor comment on an estimated purchase price of 100 million euros, or $119 million. Market sources suggested the amount would likely be at a discount from what Prada paid during a heated battle for fashion brands in the 1990s.

Petrow stressed Change Capital would preserve the positioning of Sander, which is known for “super premium, very high-quality, conservative designs.”

“We’re gearing up for a three- to five-year investment horizon,” he said.

This story first appeared in the February 24, 2006 issue of WWD.  Subscribe Today.

After that, the options include an IPO, trade sale or flipping the company to another financial group.

Petrow spoke in bullish tones about Sander’s prospects, and said Change Capital had no intentions to seek the involvement of Sander herself, who founded the brand in Hamburg in 1975 and made it a benchmark label of the minimalist Nineties. Known for her uncompromising quality, intensive fabric research and quietly elegant designs, Sander sold her company to Prada in 1999, only to spar over strategy with Prada chief Patrizio Bertelli. She exited the company five months after selling it and reconciled with Bertelli three years later, only to leave one more time in 2004.

Petrow said strong press reviews and wholesale reaction to the debut men’s and women’s collections by Simons underscored Change Capital’s confidence in the Belgian designer’s ability to create a “clear fashion vision for the company” — one that is consistent with its fashion legacy, but with Simons adding “his own twist.”

In a written statement, a Sander spokesman said, “[Simons] feels very confident in the new owner, who will continue to support his work to give back to Jil Sander a strong, creative position in the fashion world. He is looking forward to collaborate with the new owner of Jil Sander.”

Petrow described chief executive officer Gian Giacomo Ferraris and chief financial officer Armin Mueller as key pillars of the Sander company that attracted Change Capital partners. Neither Petrow nor Vandevelde is expected to take on an executive role in the company.

“We are financial sponsors; we are active owners,” Petrow explained. “We’ll take an active role as a sounding board.”

Petrow said he spies “good opportunities” for the Sander business in every market where the brand is present, particularly in America, where it is “probably underrepresented.”

He said Sander “is a company we’ve been looking at for a long time and liked.”

Thursday’s deal involves buying Prada Group’s 98 percent share of Sander. The balance is publicly traded on the Frankfurt Bourse. Change Capital plans to enact a “squeeze out” to acquire all outstanding shares, a process that will take about four to five weeks, Petrow said, noting there are about 2,000 individual shareholders left.

In a statement, Bertelli said the Sander sale reflects a plan to focus on the core Prada and Miu Miu brands. Yet it is clear Prada Group, which whittled down German manufacturing of Sander’s collections and shifted them to its Italian facilities, would still have links to the new owners.

“I wish [Change Capital] and their teams a very successful future and look forward to continuing to collaborate in various areas of product development and manufacturing,” said Bertelli.

There are 16 directly operated Sander stores and about 50 franchised ones worldwide, plus wholesale distribution in Asia, Europe and North America. New locations opened in Taiwan and Hong Kong last fall. Also on Sander’s retail agenda as of last December was a store in Rome and a smaller London location after its Savile Row flagship was closed last year.

Change Capital, created in 2003 and backed by the Halley family, shareholders in Carrefour, is a 300 million euro ($357 million) fund specializing in investments that leverage its expertise in the retail and consumer goods industries.

Its portfolio of companies includes home improvement retailer Robert Dyas Holdings Ltd., window blinds concern Hillarys Group and Buksesnedkeren ApS, a Danish firm that markets the H2O and Signal brands of leisure apparel.

Last October, it backed the buyout of Republic Retail Ltd., the young adult fashion retailer with 76 locations in the U.K., for 105 million pounds, or $183.2 million.

Petrow declined to identify any brands the fund might be eyeing, including the Lang business up for grabs at Prada. “It’s a very competitive market out there,” he said.