Byline: Sara Gay Forden

MILAN — Valentino and Giancarlo Giammetti may have found the deal they’ve been looking for.
HPI, the industrial holding company that controls designer apparel giant GFT SpA and sportswear maker Fila SpA, has signed a letter of intent to acquire Valentino’s business.
The news confirms rumors that the two groups were in talks and grows out of the long-term relationship between Valentino and GFT, which produces men’s and women’s apparel for the designer.
Valentino represents about $112 million (200 billion lire) of GFT’s sales with Valentino Boutique, Miss V and Valentino Uomo. GFT also produces for Giorgio Armani, Calvin Klein and Emanuel Ungaro, among others.
The designer said in a statement that the talks were about acquiring a controlling stake in Valentino and that the agreement would provide for the him and Giammetti, his partner and chief executive officer, to receive small stakes in HPI.
“For some time now, we have been studying a number of strategies to carry the Valentino name into the future,” said Giammetti. Those strategies included a possible public stock offering or sale of the company.
Giammetti added that he didn’t have any particular misgivings in view of the failure last May of HPI’s merger with Marzotto. As reported, the planned merger of HPI and Marzotto was announced with great fanfare in March but collapsed after two months when Marzotto pulled out, citing “irreconcilable differences” over strategy and organization.
“For the moment, neither of us are bound by anything, and we can always walk away if things don’t work out to our full satisfaction,” Giammetti said.
A source familiar with the planned agreement said the talks were in the initial stages and that due diligence could take a month or two. Although no figures were disclosed, industry sources said Valentino’s price tag was in the neighborhood of $300 million, and HPI’s offer is said to be around $280 million (500 billion lire).
The total volume of the Valentino business has always been closely guarded. The company put expected 1997 sales at $834 million (1.45 trillion lire), but that figure is believed to include retail sales of various licensees, royalties and sales of directly owned shops.
The Valentino empire consists of 85 stores, of which 16 are directly owned, and some 40 licenses, though Giammetti has said he is working to trim that number to 25. Valentino employs some 300 people.
Industry analysts said the deal could be a good marriage for both sides: It could offer Valentino and Giammetti an elegant way to cash out of the business while securing an important home for the brand. For HPI, Valentino would add a prestigious name to its holdings in the apparel sector.
Valentino, which recently plunged into a number of projects to freshen and update its image, has made no secret of the fact that the house has been looking for a buyer or a partner to carry it into the future. Last year, Valentino even appointed Goldman Sachs to help evaluate opportunities.
“It is unthinkable, on the eve of the Year 2000, that a sector as extraordinary as the fashion business…could be managed without substantive alliances that guarantee important synergies,” said Valentino’s Giammetti.
This fall, Valentino’s new, young line, V-Zone for men and women, will debut in stores, while a new name and a new image is being given to the range of products, including apparel and accessories that fall under Valentino’s diffusion business, Very Valentino.
HPI, which is sitting on a cash pile of at least $560 million (1 trillion lire), has been actively looking for strategic acquisitions in the apparel sector ever since the deal with Marzotto fell through. As reported in June, HPI has also contacted French sportswear maker Devanlay, which produces under the Lacoste, Jil, Orly and Scandale labels, about a possible acquisition.
The key issue in the Valentino-HPI talks, however, appears to be control. Although sources said Valentino has explored other deals in recent months, most notably a possible sale to Bulgari, Valentino and Giammetti have been reluctant to give up control.
It wasn’t clear what a deal with HPI would mean for design and management control of Valentino. But sources close to HPI said that a condition of any agreement with Valentino was HPI’s total or majority control of the company.
When asked if an agreement between HPI and Valentino would affect the relationship between GFT and Giorgio Armani, whose collections represent about 30 percent of GFT’s total sales, or $252 million (450 billion lire), the House of Armani replied, “The Armani group is proceeding with its strategic development plan for the next few years, and these strategies won’t be affected by the acquisitions policy of HPI.”
Armani has just renewed its men’s wear license with GFT and is expected to start discussing its women’s wear license this fall. Armani, as reported, has been mulling the possibility of producing the women’s diffusion collection in-house.

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