IN THE FIGHT FOR FENDI, WILL LVMH AND PRADA OUTMANEUVER GUCCI?
MILAN — The Fendi saga is becoming an opera worthy of opening night at La Scala. It’s got everything: intrigue, mystery, conspiracy and vendetta — not to mention five crafty sisters.
The latest twist, unconfirmed, but rampant in Milan’s financial community: LVMH’s Bernard Arnault is said to be teaming with Prada’s Patrizio Bertelli to bid for the Roman fashion house. Their offer — which would, not incidentally, knock out Gucci — is said to be well above Gucci’s reported bid of $707 million.
Late last night, yet more details emerged of what could become fashion’s most compelling joint venture. One scenario has Bertelli and Arnault each taking one-third of the company, and the Fendi sisters keeping the remaining third.
Bertelli’s Prada Group would run Fendi, while Arnault’s Louis Vuitton would be called upon for distribution services.
The Fendis would function mostly in an advisory capacity.
Domenico De Sole, chairman and ceo of Gucci, who only Monday had been the front runner in the Fendi race, declined to comment on the reports at the Gucci show Tuesday night. According to knowledgeable sources, however, De Sole was said to be furious with the Fendis, who, according to any number of different scenarios, were deep in late-night negotiations with Bertelli Tuesday and possibly even still debating whether to sell. According to other sources, the Fendis are now asking for an astronomical price, and may be using Gucci’s bid to force other suitors to pay more.
The Fendis declined to comment.
Many analysts scoffed at the notion of Fendi being run by a Prada/LVMH alliance. And amid the increasingly intense speculation, Prada and LVMH have kept a low profile. A source close to Prada told WWD that while no deal with LVMH was in the works for Fendi, other arrangements between the two companies were possible. A spokesman for LVMH in Paris declined to comment.
Others intimately involved in the situation, however, insisted that a Prada/LVMH/Fendi alliance was on the front burner.
A Prada/LVMH partnership could have darker implications: revenge on Gucci. Bertelli was Arnault’s ally when the latter attempted a hostile takeover of Gucci earlier this year. De Sole won that battle, however, with the help of his new partner Francois Pinault, who is emerging as a major competitor to Arnault.
Pinault is expected to hand over the control of Yves Saint Laurent to De Sole and Gucci’s creative director Tom Ford after the two complete due diligence on YSL’s parent, Sanofi. When Pinault bought Sanofi earlier this year, he also acquired a number of perfume labels, and, ironically, Fendi’s was among them. Pinault would probably not react favorably to a Prada/LVMH takeover.
The Fendi sale has been complicated by the fact that there are five sisters involved, each of whom has a 20 percent stake in the company. For a sale to be successful, all five sisters must agree to hand their stakes to the same buyer.
While De Sole is reported already to have wooed four of the sisters to his side, one sister, Franca, has resisted Gucci from the very beginning. She was said to be instrumental in forcing the talks with Gucci, which were said to be progressing rapidly, to break down suddenly on Monday.
But the situation is highly volatile, said one industry source, and the Gucci/Fendi talks could be back on track at any moment. This same source indicated that Gucci wanted Fendi badly, but would not pay what De Sole considers an unreasonable price. “Gucci does not spend like a drunken sailor,” the source said. “The company has to answer to its shareholders.”
The rivalry between Bertelli and De Sole began in the summer of 1998, when Bertelli suddenly announced that he had acquired a 9.5 percent share in Gucci, shocking both De Sole and Ford. Bertelli proposed that the two companies cooperate on strategy and production, but De Sole rejected the idea from the start and made it clear he wanted nothing to do with Bertelli, a major competitor.
Less than a year later, Bertelli happily sold his stake to Arnault, who by then was in the midst of his takeover attempt of Gucci. Bertelli made a profit of $140 million in capital gains on the sale, and gave Arnault a powerful boost, although the Frenchman ultimately failed to gain control of Gucci.
Prada, LVMH and Gucci are feverishly building powerful luxury goods groups and are shelling out big bucks to do so. Prices are rising by the day now that the race to buy is becoming increasingly cutthroat.
Bertelli, the owner and managing director of Prada, formed a joint venture with Helmut Lang earlier this year, and in the past month announced plans to buy Jil Sander and Church’s. He is also thought to have a 9.5 percent stake in one of Fendi’s operating companies. Neither Bertelli nor Fendi will confirm this, however.
Equities analysts say Bertelli’s portfolio of potential acquisitions is bursting at the seams — one of his future targets is the Italian luxury footwear company Sergio Rossi — and that the Tuscan entrepreneur has a grand strategy in mind. “He is not cherry-picking these companies,” said one London analyst. “He has very grand, very specific plans for his luxury goods group.”
Bertelli spent approximately $105.6 million for Jil Sander, and has offered Church shareholders $172 million for a controlling stake in the English shoe company. And Bertelli announced Tuesday that he had taken an option to buy 20 percent of the southern Italian clothing manufacturer GTR, which currently produces Helmut Lang’s jeanswear.
Bertelli said in a statement that GTR would now produce Helmut Lang’s collection and some of Prada’s clothing lines, although he didn’t specify which ones. The deal is not a license, but rather a production agreement between the two companies. Prada’s lines are currently produced in-house.
LVMH, as reported, just snapped up the French shirt maker Thomas Pink, launched a bid for the Swiss watch manufacturer Tag Heuer and recently took control of the American beauty brands Benefit, Hard Candy, and Bliss.
Gucci Group, with a cool $2.9 billion cash injection from Pinault, is hunting for acquisitions, the first of which will most likely be Sanofi. Gucci’s interest in Fendi first surfaced last summer with rumors that De Sole had managed to woo two of the sisters. Other reports of mergers, sales and acquisitions are whipping through Milan like cold winter winds from the Alps. Industry sources say Moschino is up for sale, and that J.P. Morgan is helping the company look for a buyer.
Moschino denied the report, and a spokesman for J.P. Morgan in London declined to comment.
Once again, rumors have surfaced that Italy’s Holding di Partecipazioni Industriali — Valentino’s parent, which is also building its own luxury goods group — may be interested in buying Escada. Both HdP and Escada’s owner, Wolfgang Ley, however, denied they were in talks, and Ley said his company was not up for sale.
One company that’s having trouble finding a buyer is Gianfranco Ferre. For nearly two years, the designer’s partner, Franco Mattioli, has wanted to sell his 49 percent stake in the company — worth an estimated $140 million.
Although suitors such as Marzotto, Ittierre and HdP were all said to be interested, all wanted majority stakes in the house. Now, industry sources say, their interest in Ferre may be flagging. The three companies declined to comment.
When Mattioli first announced he would sell, Ferre said he didn’t want anyone in the fashion business to buy the stake.
“I want a bank or purely financial investor,” Ferre told WWD last year. Industry sources today describe Ferre’s situation as “stuck,” and said no one, not even a bank or institutional investor, wanted to pay $140 million for a minority stake in a company.