GUCCI STRIKES AGAIN: BUYS MAJORITY SHARE OF BOTTEGA VENETA

Byline: Samantha Conti

MILAN — Gucci Group is on the books with its first acquisition of the year.
In its ongoing drive to expand its luxury brand portfolio, the company has announced plans to buy the Italian ready-to-wear and accessories company Bottega Veneta.
Gucci said in a statement Wednesday that it would take a 66.67 percent stake in the company via a capital increase of $96.2 million and the purchase of shares from current shareholders for $60.6 million, for a total of $156.8 million.
“Bottega Veneta is a luxury brand with a wonderful heritage based on high-quality leather accessories and shoes — products that fit neatly with our own core areas of expertise and that can generate high margins,” said Domenico De Sole, president and chief executive of Gucci Group, adding that the capital increase would be used to “accelerate” the brand’s global development. Bottega Veneta’s sales in 2000 were approximately $50 million.
While De Sole declined to give sales projections for the business, he told WWD he had “ambitious plans” for the company.
“From Day One, when I sat down with the management team and we started talking about acquisition targets, Bottega Veneta was at the top of the list.”
De Sole stressed that while Gucci Group creative director Tom Ford was, as a senior manager, involved in the purchase of Bottega Veneta, Ford “would not be getting involved” in the design of the collection, as he has in taking over the design of the Yves Saint Laurent Rive Gauche rtw line, which Gucci acquired in November 1999.
The remaining 33.33 percent of Bottega Veneta shares will remain in the hands of its shareholders — the Moltedo family, which founded Bottega Veneta in 1962. Vittorio Moltedo will remain chief executive of the company and will become chairman. Laura Moltedo, Vittorio’s wife, will continue in her role as creative director.
Gucci said in the statement it plans to develop Bottega Veneta’s penetration in all the major luxury markets through a mix of directly operated stores in key locations and selected luxury wholesale channels.
Bottega Veneta has 12 directly operated stores in the U.S., five in Europe and four in Asia. Distribution in Japan is managed by a third party, AOI, but that agreement will be terminated on June 30 as part of Gucci Group’s strategy to control distribution. In July, Bottega Veneta will take control of distribution and marketing in Japan, including the operation of 19 stores.
De Sole added that Gucci Group’s Japanese manager was “very influential” in helping Bottega Veneta buy back the stores in that market.
Vittorio Moltedo said the deal with Gucci would enable the company to “take important strategic initiatives more quickly and extensively than we could have on our own.
“We…look forward to taking the Bottega Veneta brand to the next stage in its development,” he said in the statement.
Japan accounts for over 35 percent of Bottega Veneta sales, followed by the U.S. with about 33 percent and Europe with approximately 15 percent. Excluding Japan, sales from Bottega Veneta’s directly operated stores accounted for 35 percent of all sales. The company has only five franchised units.
Leather goods generate between 70 and 75 percent of sales and are the company’s most important product category. Shoes, rtw and eyewear make up the rest of sales.
Bottega Veneta has always been a low-key, niche brand with a solid reputation — and no licenses. Among its best-known products are the “Intrecciato” woven leather handbags and accessories and its Venetian loafer, which has a plug in the upper. The company’s operations are based near Vicenza, in the Veneto region, and near Milan.
In 1971, Bottega Veneta was one of the first Italian houses to open a boutique on Madison Avenue in New York. Today, it has more than 60 doors worldwide, thanks in part to its growing apparel business. The rtw line, which made its debut in October 1997, has benefited from both critical acclaim and commercial success. Clothing currently generates about 20 percent of company sales.
Andrew Gowan, an equities analyst for Lehman Bros. in London, called the deal “a fine, sensible acquisition for Gucci,” but one that will have little financial impact on the company.
“Gucci still has $2.2 billion to spend, so it’s the acquisition of a big company that’s going to make the difference to shareholders,” he said.
Gucci said in the statement the transaction would have a “neutral” impact on its 2001 earnings-per-share before goodwill and trademark amortization and would be accretive after that. The deal with Bottega Veneta would give rise to annual goodwill and trademark amortization of approximately 4 cents per share, the statement added.
Bottega Veneta is Gucci Group’s first acquisition this year — but it certainly won’t be the last. The company has more than $2.2 billion still earmarked for acquisitions, and the firm, analysts say, is under pressure from shareholders to invest it. Asked when Gucci would announce its next acquisition, De Sole declined to comment.
As reported, the company is said to be in advanced stages of talks with the hot 29-year-old designer Nicolas Ghesquiere, who has rejuvenated the Paris-based house of Balenciaga, about backing a collection. Balenciaga is owned by Group Jacques Bogart, which is controlled by French entrepreneur Jacques Konckier and his family. Ghesquiere is said to be more eager to ally himself with the Italian group than Konckier. He recently left his design post at the Italian label Callaghan, freeing him up further to develop his own fashion house under Gucci.
There are other French brands Gucci could be considering, including Guy Laroche, which is owned by Groupe Bic, the French ballpoint pen and disposable razor giant. For more than a year, beauty giant L’Oreal has explored the possibility of a sale of Lanvin. It has even held preliminary talks with Pegasus Apparel Group. Sources also indicate that the house of Courreges, an icon of Sixties mod style, might be another potential target.
As for Italian brands, sources say that Gucci has been in talks with Giorgio Armani, Dolce & Gabbana and Versace, although nothing has come to fruition. Armani has vowed to forge ahead on his own for now; both Dolce & Gabbana and Versace have denied they are up for sale.
The latest Italian company to pass through the rumor mill is the Rome-based luxury jeweler Bulgari, which sources here say could be cooking up a deal with Gucci. A Gucci spokesman had no comment and a Bulgari spokesman could not be reached for comment at press time. Bulgari is quoted on the Italian Bourse and is considered one of the more successful luxury stocks among financial analysts.
Gucci Group has had its checkbook open since the $3 billion cash infusion in 1999 from strategic partner Pinault Printemps Redoute, its white knight in the hostile takeover battle with archrival LVMH Moet Hennessy Louis Vuitton.
The group has been rapidly amassing brands for its portfolio. Besides the Gucci brand, it now owns Yves Saint Laurent, the YSL and Roger & Gallet beauty brands, Sergio Rossi, Boucheron and watchmaker Bedat & Co.

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