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Versace’s Latest Vision: Seeks Minority Investor On Road to Eventual IPO

Seven years after his death, Gianni Versace’s brother and sister are planning to make his dream of taking the company public a reality.

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MILAN — It was Gianni Versace’s goal to list his fashion company on the stock market, and now, seven years after his death, his brother and sister are planning to make that a reality.

In an exclusive interview, Daniele Ballestrazzi, Versace’s interim chief executive, said the company has appointed Lazard and Credit Suisse First Boston to find a minority investor with the eventual plan to take Versace public. The minority investment could come as early as this year. Although he said an initial public offering is at least three years away, Ballestrazzi sought to quell growing fears that Versace is spiraling into financial difficulty.

Ballestrazzi said it was only logical for the company to once again look at a stock market listing, a plan the family was pursuing until Gianni’s tragic death in 1997.

“This is one of the few legendary brands around,” Ballestrazzi said during an interview at the group’s headquarters here. “The time has come to resume the project.”

Ballestrazzi declined to specify how large a stake the Versace family is willing to sell, but earlier this month Santo Versace told the Italian newspaper Corriere della Sera that the company would be willing to sell as much as 25 percent to a fund.

Versace has declined to name potential investors, but has claimed that multiple parties have expressed an interest. U.S. Cerberus Capital Management L.P., one of whose funds bought Fila, is considered a possible candidate, but observers said it’s unlikely Cerberus would take a minority position in a company.

Such a move would radically alter the shareholding structure of the company and alter the balance of power among family members. Currently Santo, Gianni’s brother, owns 30 percent, while his sister, Donatella, owns 20 percent. Allegra Beck, Donatella’s daughter, inherited 50 percent of the company from her late uncle and will obtain full control over her stake when she turns 18 this summer.

Offering up a minority stake without full managerial control could be a tough sell, some in the market have said. But Ballestrazzi stressed that the minority shareholder will have a hand in selecting the company’s permanent ceo, as well as some strategic input to boot.

This story first appeared in the March 29, 2004 issue of WWD.  Subscribe Today.

“If we just wanted financing, we would go to a bank,” he said.

Andrea Paladini, an analyst with Centrosim here, said he thinks Versace can find a willing minority investor if the price is right.

“Since it’s only a minority stake, it would be more appealing if they offered it at a discount,” he said, estimating that the company is probably valued somewhere between $242.46 million, or 200 million euros, and $303.07 million, or 250 million euros. “After all, we know they need the resources.”

Harry Bernard, executive vice president and chief marketing officer at Colton Bernard, a San Francisco-based consulting firm, acknowledged that Versace has tremendous brand awareness, but he believes the product’s desirability and business have suffered.

“There isn’t a serious venture capital group that will be interested in any company that has little or no management capability,” said Bernard. “When you want to buy a business, you want to buy its cachet, its potential and its management structure. Since 25 percent is being offered, the buyer won’t be in a position to develop a management structure. There isn’t a good solid reason for someone to buy the company in its current configuration.”

In the meantime, Versace is restructuring to reverse losses at the house and recapture lost market share.

“The plan is not just about cutting costs, but it’s about taking back what we think belongs to Gianni Versace,” said Ballestrazzi, who added that Versace shaved $36.4 million, or 30 million euros, off its operating costs in fiscal year 2003.

Versace posted a loss in 2002. Sales figures for 2003, released last week, show a 17.2 percent drop to $484.9 million, or 400 million euros, from $585.3 million, or 482.8 million euros, in the year before. Ballestrazzi said that a strong euro accounted for about half of last year’s sales drop. Versace will release its full results sometime in April.

Ballestrazzi also noted improving conditions, though, particularly in Italy and the U.S. He said that sales of the women’s fall/winter 2004 collection were up 20 percent worldwide.

Also on the upside, Versace just got a fresh bank loan to pay back the $121.2 million, or 100 million euros, bond due in July. Banca Intesa will provide financing of $169.7 million, or 140 million euros, under the terms of the agreement.

Among various restructuring measures, Versace is looking to reduce its time between product conception and reaching the market, boost operating efficiencies, expand in Asia and develop its nascent accessories business.

Starting with spring/summer 2005, Versace will merge its pre-collection and main collection, speeding up delivery time, which has been a problem in the past. The runway collection will follow accordingly.

Ballestrazzi is also looking for ways to leverage the well-known Versace brand into lucrative licensing deals. He said the company is firming up negotiations to open more hotel and condo units like its six-star resort on Australia’s Gold Coast. Such a deal would generate royalty income and revenue, as these resorts are stocked with Versace products — from furniture to bath gel.

Ballestrazzi wouldn’t discuss other licensing deals in the works, but he said the company is looking for ones in the same spirit as the company’s eyewear pact with Luxottica. Word has it that Versace is looking to strike deals for both beauty products and watches.

In the meantime, the company is delegating more power to IT Holding, its long-time licensee. IT Holding will now have total control over Versus and Versace Couture Jeans distribution in North America and Mexico — another move that will save money for Versace.

In other cost-conscious moves, Versace has reduced head count by about 200 people over the last six months. It will also close about seven or eight stores by the end of the year and reduce the size of some sprawling flagships.

On the real estate front, Ballestrazzi said the group doesn’t rule out potential disposals, but he stressed that the Via Gesu palazzo isn’t for sale. Instead, Versace is concentrating on using its corporate office spaces more efficiently. A spokesman said Versace is even considering using the Via Gesu space as a showroom.

— With contributions from Lisa Lockwood, New York

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