GUCCI REPORTED TO BE ONLY ONE SISTER AWAY FROM DEAL WITH FENDI
NEW YORK — Gucci is one sister away from winning the Roman prize: Fendi.
Informed sources indicated that four of the five Fendi sisters have agreed to sell their individual 20 percent stakes in the famed fur and accessories business to Gucci.
Although Gucci doesn’t quite have Fendi tucked under its arm like one of the company’s hot baguette numbers, a deal, if it is
to happen, could be concluded quickly.
Gucci has reportedly convinced Paola, Anna, Carla and Alda to sell their shares, but one sister, Franca, has thus far been reluctant to sell and is said to be particularly concerned about the future of her children in the business.
Gucci is balking on guaranteed positions for the children, according to sources, and the four sisters already in agreement are trying to bring Franca into the fold. If she doesn’t agree, the deal will fail, sources indicated, as each sister has veto rights on the sale of the company.
If Gucci ultimately triumphs, it will heat up an already torrid season of major fashion deals and add buzz to the electric what-will-happen-next climate at the runway shows in Milan this week. Gucci shows today; Fendi on Thursday.
The five Fendi sisters are running one of Italy’s hottest fashion companies, expected to post $490 million in revenues this year. That’s a sizable jump from last year’s estimated $313 million. And their success has not gone unnoticed, as numerous competitors continue to expand their power bases in luxury goods.
For the past two years, firms inside and outside the sector have been eyeing Fendi. The leveraged buyout fund Texas Pacific Group (TPG) that recently acquired Bally reportedly conducted due diligence on Fendi and offered upwards of $440 million.
Bulgari chief executive Francesco Trapani admitted earlier this year that he had looked at Fendi’s numbers and found the company “very interesting.” LVMH Moet Hennessy Louis Vuitton has also been cited as a possibility, although the French luxury conglomerate denies any interest.
But the real battle seems to be between two of Italy’s luxury titans. Domenico De Sole, the chairman and chief executive officer of Gucci, and Patrizio Bertelli, who owns and manages Prada, have squared off in the climate of acquisition fever.
Gucci has a cash pile of $2.9 billion — a windfall from its new strategic alliance with the French retail group Pinault-Printemps-Redoute — that it plans to invest in new companies.
Fendi is considered a catch because 40 percent of its revenues come from the lucrative accessories sector, a sector that Giorgio Armani last week revealed he’s ready to join, with an ambitious plan for a new division and a significant investment. Plus, the Fendi label is enjoying a major renaissance globally, thanks largely to lusty demand for its pricey handbags dripping with fur, embroidery and sequins. They’ve been a hit since they were launched with the fall 1997 collection.
By winning-over four members of the family, Gucci has seemingly pulled off a major coup. The sisters have been deeply divided over the future of the company, which is essentially run by five different families. And under Fendi’s Byzantine corporate structure, all five sisters must agree to turn over their 20 percent stakes in the core company — Fendi Paola e Sorelle Sas — to the same person if a sale is to be successful.
In recent weeks, Prada’s Bertelli, fresh from buying majority stakes in Jil Sander and Helmut Lang, was said to have wooed one Fendi sister to his side. He is reported to have purchased a 9.5 percent stake in Fendi, although that stake appears to be in Fendi Srl, the company that oversees the manufacturing and commercial arm of the business — and has nothing to do with the core company.
De Sole has reportedly offered more than $700 million for Fendi. But neither he nor Bertelli have weighed in on those reports. Neither could be reached for comment Monday.
Chairman Carla Fendi has also given few hints, but said in a recent interview that she would lean towards a fashion firm. “It’s always better for a company to be bought by someone who knows what the industry is about,” she said.
Founded in 1925 by Adele and Edoardo Fendi, the fur and leather accessories company has always been a family affair. The firm has long been known for furs and ready-to-wear designed by Karl Lagerfeld, who has been working for the company for nearly 35 years.
Lagerfeld’s latest three-year contract began on Jan. 1, 1998, and he has the option to renew for another three years, although it is unclear what his plans are should the company change hands. It is understood that such a change would free him from his contract. Lagerfeld could not be reached for comment.
The company’s fortunes rocketed following the fall 1997 introduction of the Baguette, which comes in 500 different styles. It has sold about 300,000 units in two years. Prices run from a couple hundred dollars up to $5,000 for heavily bejeweled styles.
But the industry views Fendi as more than a one-trick pony. Industry consultants in Europe say the firm has fortified its business in other ways. It took control of all distribution in North America, eliminated a series of nonstrategic licenses in the men’s wear division and put a larger focus on the accessories business.
The company has also begun to roll out a radical new store design known as Dark Shop Fendi. Like its bags, the stores are an antidote to the clinical, minimalist white boxes that are now common among many design houses. Features include black panels, dark brown wooden tables and steel shelves and floors lit with blue light.
Fendi’s sales, including licensed products, are spread throughout various global markets, with 80 percent of sales coming from exports. Leather accessories make up the biggest share of sales, at 40 percent, followed by ready-to-wear, 25 percent, and furs, 20 percent. Other accessories account for the remaining 15 percent.