By Evan Clark
with contributions from Luisa Zargani, Joelle Diderich
 on November 14, 2018
Red Valentino RTW Spring 2019

Could Valentino be the next designer name to find a new home?

Industry and financial sources are buzzing that Gucci parent Kering is eyeing the brand, which Qatar-backed Mayhoola for Investments picked up in an $858 million deal six years ago.

One source said Marco Bizzarri, president and chief executive officer of Gucci and architect of the brand’s current success, reached out to Mayhoola about buying Valentino last year.

That offer was turned down — but in the world of high-stakes designer dealmaking, the door is rarely shut for good.

Sources have described the Qataris as not exactly looking to sell Valentino, but as being open to listening to proposals. And in the past several weeks, rumors have been flying that the talks with Kering have restarted.

Kering declined to comment, and Mayhoola officials could not be reached for comment.

The market is ripe for big deals and it’s a good time for would-be buyers to go out and see what’s available. The stock market is still at a relative high, making it a potentially profitable time to sell, and funding for a deal is readily available. There are also few designer properties that could really move the needle at a company like Kering and even fewer opportunities to snatch one up.

And there are others that are sweet on the Valentino aesthetic.

Luxury outerwear brand Moncler, for instance, tapped Valentino creative director Pierpaolo Piccioli for one of its Genius capsule collections. There are those who see an even closer connection for the two brands.

One source said Moncler was another suitor for Valentino. But the company threw cold water on that and in a statement said, “Moncler denies the rumors, reaffirming that today the company is completely focused on its current projects requiring full dedication and energy from the whole team.”

In the end, the X factor for Valentino might well be how intently Mayhoola is listening to any offers.

Stefano Sassi, Valentino’s ceo, said in May that Mayhoola wanted to build in luxury, not withdraw and that the investment group was evaluating “an even more important presence through Valentino or other interventions in this sector.”

Mayhoola has contemplated at least a partial divestment in the past. The idea of an IPO was floated openly only to come and go, come back and leave again before ultimately being shelved.

A banking source said Rothschild was tapped as “a financial consultant to evaluate strategic options for Valentino, and the IPO was one of them.”

An IPO and an outright sale are very different things, though, and at least one Italian industry source brushed away the idea that Mayhoola is looking at a divestiture, noting the Qatari fund has “ambitions to further develop Valentino.”

“It is not the least interested in selling Valentino,” the source said, contending that Valentino will log another year of growth in 2018 and that it is a “superhealthy” company.

There is also said to be an emotional connection to the brand at Mayhoola. Sheikha Mozah, who is the second of the Qatari emir’s three wives and said to be influential in the fund’s fashion choices, is a prominent fan of Valentino and a key customer.

But the brand is not sacrosanct, as the IPO process shows, and a sale could be a lucrative one.

Last year, Valentino’s sales rose 5 percent to 1.16 billion euros as earnings before interest, taxes, depreciation and amortization decreased 7.7 percent to 190 million euros.

Some believe the brand could fetch 2.5 billion euros to 3.5 billion euros in a sale today.

There is also a favorable comparison in the market for the brand.

In September, Michael Kors Holdings Ltd. inked a $2.1 billion deal to buy Versace, valuing the Italian brand at 2.5-times sales and 22-times EBITDA. That was seen as a solid valuation for a brand that has not expanded as many hoped in recent years and a benchmark for other luxury players. If Versace’s valuation were applied to Valentino’s 2017 results, the company would see it trade in a range of 2.9 billion euros (based on sales) to 4.2 billion euros (based on EBITDA).

Regardless, it looks like Mayhoola would get back more than 2.5-times its initial investment if it chose to sell.

And other pieces might also be clicking into place for a deal on both sides.

• The Valentino business has been in flux with heavy competition from Gucci just as Piccioli adjusted to the departure of former design partner, Maria Grazia Chiuri, who jumped ship for Dior in 2016 and took some key staffers with her.

• Qatar has been pressured economically, diplomatically and logistically by a blockade led by Saudi Arabia over the small, oil-rich state’s alleged ties to terrorism.

And for Kering, another Italian fashion power player might be just what’s needed to continue its expansion.

• Gucci’s rocketlike growth can only last so long and Valentino, which plays in much the same space, would give Kering a chance to keep hold of those high-spending shoppers should its flagship brand’s expansion moderate.

• Kering is also primed for a luxe deal  following its less successful bets on lower price points with Puma and Volcom, 1.9 billion euros in cash and short-term investments on the books, a manageable debt load and a market capitalization of over 51 billion euros.

That’s enough to perhaps bring the two together — or to fuel rumors of a buyout. But it remains to be seen if Kering is willing to commit and write a 10-figure check — and if Mayhoola is willing to part with a prized asset.

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