PARIS — Hennes & Mauritz is entering the acquisition game.

This story first appeared in the March 7, 2008 issue of WWD. Subscribe Today.

The Swedish fast-fashion behemoth said Thursday it purchased a 60 percent stake of privately owned Fabric Scandinavien AB, makers of the ubertrendy Cheap Monday fashion label, among others.

The deal cost H&M 564 million kronor, or $91.7 million at current exchange, and includes an option to acquire the remaining 40 percent within three to five years. Fabric Scandinavien will operate as a stand-alone subsidiary within the H&M Group, the company said.

The acquisition is a good fit for H&M. Denim brand Cheap Monday is sold in more than 1,000 stores globally and experienced a 300 percent increase in turnover last year, as demand for its affordably priced rock ‘n’ roll looks stole share from more premium-positioned players.

Fabric Scandinavien’s portfolio also includes contemporary fashion chains Weekday and Monki. Weekday, which offers a selection of edgy fashion labels, counts six stores in Sweden with a Copenhagen-based store slated to open this month, while Monki’s 12 stores, scattered around Sweden, target young women.

“We have been impressed by Fabric Scandinavien’s development for a long time and we see a potential to develop stores and concept stores in other markets,” H&M’s chief executive officer Rolf Eriksen said.

“By working together, we can accelerate the growth further. We can also do it in a more efficient manner by drawing on H&M’s experience and knowledge of, for example, production, logistics and establishment,” he added.

H&M has grown organically at breakneck speed following a boom of global flagship openings; collaborations with famous designers, including Karl Lagerfeld, Stella McCartney, Viktor & Rolf and Roberto Cavalli, and the launch of its upscale subsidiary, COS.

In a conference call, H&M chief financial officer Leif Persson said the Fabric Scandinavien purchase represented a significant move for the Swedish retailer, marking the first time the group has dipped its toes into the multibrand retailing arena. H&M has ambitious plans to roll out Monki stores globally and would not rule out further acquisitions, he added.

The deal also nets the company the forward-thinking leadership of Fabric Scandinavien, according to Persson, as well as its 300-strong employee roster.

“We are very sure we will have a lot of inspiration from the people working in Fabric Scandinavien who are very creative, very cost-conscious and have a lot of ideas,” said Persson, adding the company had “very big expansion potential.”

However, Persson said Fabric Scandinavien would be kept as a separate entity.

“There will be no collaboration in design or buying,” said Persson, noting that Cheap Monday will not be sold in H&M stores.

For the fiscal year ending April 30, Fabric Scandinavien reported sales of 250 million kronor, or $40.7 million, and an operating profit of 67 million kronor, or $10.9 million. H&M said it expects Cheap Monday’s sales for 2008 to reach about 400 million kronor, or $65.1 million.