By  on May 17, 2007

MILAN — Valentino Fashion Group has a new investor — but the bidding battle could have just begun.

Confirming a WWD report, private equity fund Permira has acquired 29.6 percent of VFG from the Marzotto family's International Capital Growth Sarl for 782.6 million euros, or $1.06 billion at current exchange. Permira, which was supported in the deal by merchant bank Mediobanca, Unigroup and Citibank, said it is interested in increasing its stake in VFG by buying additional shares at the same per-share price of 35 euros, or $47.60. The deal values all of VFG at almost 2.7 billion euros, or $3.7 billion.

But the deal Wednesday immediately stirred a wave of speculation over the future of the group, which owns Valentino SpA, a majority stake in Hugo Boss AG and men's wear brand Lebole, and holds licensing deals for M Missoni and Marlboro Classics. Permira had been locked in a bidding battle with private equity fund Carlyle Group, which had linked with VFG chairman Antonio Favrin and his company, Canova Partecipazioni Srl, to buy the Marzotto family stake. Canova owns 20 percent of VFG.

Carlyle officials declined comment Wednesday on their next move, but sources told WWD it remains in talks with VFG shareholders and still could mount its own offer for control of the group. A source close to the company said the bidding could go as high as 50 euros, or $67.65, a share.

Despite selling a 29.5 percent stake, the Marzottos control almost 24 percent of VFG through two other financial companies: Gaetano Marzotto and a number of other family members control Tidus Srl, which owns 12.43 percent of VFG, while Paolo Marzotto's PFC Srl controls almost 11 percent of the group. (Officially, PFC controls 7.45 percent of the shares, but a source close to the situation said the amount reaches almost 11 percent when other family members are taken into account.)

A well-placed source here said Favrin first had tried to convince the Marzottos to sell VFG, in which Favrin's Canova owns 18.78 percent. However, according to the source, Favrin and his partner in the Canova company, Dario Segre, subsequently bypassed the Marzottos and teamed up with Carlyle to secure management positions in the group, while at the same time negotiating a fee of 18 million euros, or $24.5 million, for initiating a Carlyle purchase of VFG.

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