MILAN — Roberto Cavalli has done it again.

This story first appeared in the August 5, 2009 issue of WWD. Subscribe Today.

The designer’s reluctance to reduce the lofty valuation he places on his fashion brand has resulted in talks breaking down between Cavalli and Italian private equity firm Clessidra SGR SpA, which had been in exclusive negotiations since the start of the year about taking a stake in Roberto Cavalli SpA, WWD has learned.

Clessidra pulled out of talks to buy a 30 percent stake in Cavalli over the weekend, sources said Tuesday.

“Relations have cooled,” a person familiar with the situation said. It was not clear if they have done so permanently.

Clessidra had signed a letter of intent in June and was expected to secure a deal by the end of September. However, talks broke down after Cavalli declined to budge on his asking price or to sell a larger stake for the same price, another source said. The amount Clessidra was offering could not be learned.

A spokesman for Clessidra declined to comment Tuesday, while a Cavalli spokeswoman could not be reached for comment.

Last year, net profits at Cavalli declined to 822,922 euros, or $1.2 million, from 8.8 million euros, or $12.1 million in 2007, on sales that edged up 1 percent to 112.9 million euros, or $166.1 million. Earnings before interest, taxes, depreciation and amortization fell to 4 million euros, or $5.9 million.

The bottom line is expected to come under further pressure this year, after Cavalli forecast in May that 2009 revenues would decline by 12 to 13 percent

Dollar figures were converted at average exchange rates for the periods to which they refer.

The impasse is a case of history repeating itself as far as Cavalli is concerned and a reminder of private equity investors’ reluctance to meet the megavaluations of three or four years ago.

But a Clessidra deal seemed problematic almost from the beginning. After reaching a tentative deal with the private equity company earlier this year, in May the designer seemed to change his mind yet again. “I’m not so sure I want to sell in the end,” Cavalli told WWD at the time. “It’s more logical to buy than to sell now.”

However, a week later the fashion house and Clessidra revealed they’d signed a letter of intent for Clessidra to buy a stake. “I had to think hard about it over the last few weeks, and I believe that it is the right way to ride the recovery after this moment of international economic-financial crisis,” Cavalli told Il Sole 24 Ore.

Even that represented a change — he had initially insisted he was selling 10 to 20 percent of his firm “but no more.” In the end, Clessidra was negotiating for a 30 percent holding — and perhaps even more given Cavalli’s declining valuation.

And the breakdown in talks with Clessidra is simply the latest wrinkle in the three-year saga of Cavalli seeking an investor. The designer called off an auction in July 2008 because of market conditions, saying valuations of his business of around 800 million to 900 million euros, or $1.14 billion to $1.29 billion, fell short of his expectations and he would not revisit a sale before 2009.

Cavalli has always seen his fashion house as worth more than investors were willing to pay — at one point saying he believed his company was worth more than 2 billion euros, or $3.2 billion at current exchange. In 2006, he seemed to be close to a deal when Saudi Arabian private equity fund SAB Capital submitted a bid for 60 percent of his business — only for the 68-year-old designer to pull out of the talks.

However, after revoicing his interest in selling a chunk of the business to fund expansion, Cavalli seemed to have found the right investor in Clessidra in January, telling WWD on the sidelines of his fall-winter men’s wear show he needed a serious financial partner, that the equity firm fitted the bill as “a well-managed Italian group,” and expressing hope a deal would help grow his company.

Clessidra was also set to bring in a chief executive officer Cavalli has repeatedly said he needs. Giancarlo Di Risio, who resigned as ceo of Gianni Versace SpA in June after a spat with the Versace family, was being lined up to take the same role at Cavalli as part of the deal, sources said.