Byline: James Fallon / With contributions from Katherine Weisman, Paris

LONDON — Never say never, but Bernard Arnault doesn’t have designs on Joseph — for now.
However, with the new ownership of Joseph — one of the U.K.’s leading designer-label retailers and a prominent wholesaler of its own private label — Arnault certainly has more than a finger in this particular pie. And in interviews Wednesday, principals in the new ownership lineup discussed plans with a familiar Arnault bravura, talking about transforming Joseph into a major player in the international fashion sweepstakes, but it was also stressed this will be done with controlled growth.
As reported, the majority stake in Joseph — 54 percent — has been acquired by Belgian financier Albert Frere and his company Compagnie Nationale a Portefeuille. Frere’s initial investment is $48.7 million, but it could increase to $110.8 million, depending on Joseph’s performance.
As other details of the new ownership emerged Wednesday, they showed that LV Capital, a venture capital subsidiary of Arnault-controlled LVMH Moet Hennessy Louis Vuitton, has acquired a 10 percent stake in Joseph. LV Capital was disclosed as a minority shareholder on Tuesday, but the size of its stake was not revealed.
Joseph Ettedgui, Joseph’s founder who remains chairman, and his brother Franklin, who remains managing director, own 18 percent of the firm, while Robert Bensoussan, a former LVMH executive, also owns 18 percent. Bensoussan becomes president of the company’s supervisory board.
Frere himself is an occasional partner with Arnault. Last year they joined forces to buy the Chateau Cheval Blanc vineyard.
Asked about the Arnault connections, Franklin Ettedgui said in a telephone interview Wednesday, “Who knows what might happen in five or 10 years, but there is no chance for now that LVMH will buy Joseph. Bernard Arnault is a minority shareholder and isn’t even on the supervisory board. He’s not involved in the strategy of the company.”
Ettedgui said that he and his brother decided to seek a financial investor to help fund the company’s future growth rather than linking with a major luxury goods company.
“We talked to them all — Gucci, Prada, LVMH — and they were all very interested and very nice,” he said. “But in the end we didn’t want to become part of one of those groups, because if you go into people like that you go into their strategy and their vision, and it’s not your own. We still wanted to control our designs, our image and our manufacturing, and we do.”
The company linked up with Frere following a review of its funding options last year. Bensoussan helped consult on the review and was offered the stake in Joseph by Frere, Franklin Ettedgui said.
“Frere didn’t know us or fashion and wanted someone who could protect his interests,” he explained. “He did the deal with Robert Bensoussan; we weren’t involved.”
A similar situation occurred with LV Capital. Arnault and Frere, in addition to being good friends, have been involved in a number of business deals in the last several years. Frere asked the Ettedguis if they would mind if he offered Arnault a small stake in the company, and they said they didn’t. Arnault then decided to become involved.
As for Joseph, Ettedgui said, the strategy under Frere’s new backing calls for growth, but controlled growth. “We don’t want to ruin 30 years’ of work by overexpanding overnight,” he said. “We will take it slowly and build the name.
“We wanted outside investment because you cannot survive in fashion today as a medium-sized company,” he added. “The choice is either to be small or be part of the big boys. But that takes money.”
The main focus will be on the expansion of Joseph’s private label business, both at wholesale and at retail. Ettedgui said the company hopes to open more freestanding stores and shops-in-stores in the U.S. and Europe and perhaps to franchise or license stores in the Far East. It also is keen to expand its fragrance business, which currently is sold only in U.K. department stores and at Joseph’s stores in the U.S. and Europe.
“We obviously have a business plan to follow, but it will be a normal progression,” Ettedgui said.
In a separate interview, Bensoussan, who coordinated the deal with Arthur Anderson for the new ownership of Joseph, pointed out, “The company is fabulously financially sound, with a 20 percent pretax profit margin. But Joseph needed a partnership to insure the long term.”
Joseph’s current annual volume is about $72.5 million.
Bensoussan, who worked as president of LVMH-owned Christian Lacroix until 1998, was also quick to stress that LV Capital’s involvement in the deal was strictly “a financial investment.” This was corroborated by a top-ranking LVMH insider. Daniel Piette, the president of LV Capital, could not be reached for comment.
Besides, the ever-acquisitive Arnault might have bigger fish to fry, according to some sources in Paris, who said that Arnault and Frere are in talks about another major fashion acquisition together. It could not be learned which company is involved.
Meanwhile, as for Joseph, Bensoussan said he will have a specific development plan ready for Joseph in roughly three months. But the main goal, he said, is to make the brand a major player in international fashion and specialty retailing.
Currently, Joseph has 25 points of sale worldwide, comprising wholly owned stores and concessions in stores, Bensoussan said.
Bensoussan also said that the Joseph name can be leveraged to new products. For example, the label has hardly developed accessories. Eyewear would be a natural and would likely be pursued via license, and Bensoussan, like the Ettedguis, is eager to expand the brand’s presence in fragrances.
“This is a beautiful brand with modern appeal, which has been beautifully managed,” Bensoussan said. “In this operation, we have a mix of partners which is very complementary. I think we can have a winner if we manage everything properly.”
After five years of running Lacroix, Bensoussan left in 1998 to be an industry consultant. He worked with Rose Marie Bravo to reposition Burberry, did corporate finance work with Andersen and had a short stint with Gianfranco Ferre. In fact, Bensoussan was supposed to be named managing director with a consultant contract at Ferre last July. However, because of family ties in Paris, he wanted to stay based between Paris and London and has bowed out of the Ferre job. With the Joseph role and stake, Bensoussan will work out of London, he said.
And while looking to their new growth, brothers Franklin and Joseph Ettedgui were on Wednesday still celebrating the deal with Frere.
“Albert Frere’s is a family-owned company and specializes in family businesses,” Joseph Ettedgui said. “They are wonderful people and it is very exciting.
“For us, it’s amazing,” he added. “When you think that when we started in London we didn’t have a penny and now we’ve built it up to this….”