NEXT FOR BERTELLI: TAKING SANDER PRIVATE, POSSIBLE PRADA IPO
Byline: Samantha Conti / With contributions from Melissa Drier, Berlin
MILAN — Prada’s Patrizio Bertelli is on his way back from Auckland, and he’s ready to tighten his grip on Jil Sander AG.
Bertelli announced plans Thursday to pull Jil Sander AG off the Frankfurt stock exchange in a move that will clearly consolidate his power within the company. But there’s another scenario: It could be a first step toward taking the entire Prada Group public.
The Prada chief, who is set to return to work in Milan next week after a crushing defeat in the America’s Cup, said in a statement he plans to offer approximately $320 per share for the 102,500 non-voting, preferred shares currently traded on the market.
He said the offer was 35 percent higher than Jil Sander AG’s average share price over the past three months. As reported, the stock hit an all-time low on Feb. 4, plummeting to $200 just after Sander left the company. In September, it was at a high of $315. The current price is about $305.
Last August, when Bertelli bought Jil Sander AG, he acquired 75 percent of the voting shares and only 18 percent of the preferred shares. Sander holds the remaining 25 percent of the voting shares.
What this move means for Sander, who is vacationing in the Caribbean — sailing on a yacht — after an emotionally-charged week of collections here, is unclear. The designer deserted the company in late January after battling with Bertelli over spending and strategy.
At the time, both Sander and Bertelli said Sander’s fall 2000 collection would be the last she designed for the house. The two are set to meet, and may even discuss the possibility of a reconciliation, as soon as Bertelli returns from Auckland.
Prada’s Luna Rossa, the silver-and-red sailboat that Bertelli hoped would win the America’s Cup, was trampled by Team New Zealand in a best-of-nine series of races that ended earlier this week.
If Bertelli’s current offer of $320-per-share is successful, the Prada chief will no longer have to publish financial results, justify his strategies to the market or answer to minority shareholders, a small but vocal group that includes Jil Sander’s devoted boutique franchisees. “It’s certainly easier to take care of restructuring and investments when you don’t have to answer to shareholders,” said Davide Vimercati, an equities analyst with Salomon Smith Barney in London. “That could very well be the reason behind Bertelli’s decision.”
Ironically, some observers see privacy as a short-term shelter, speculating that the growth-hungry Bertelli will have plenty of shareholders and second-guessers in his future: Several financial sources believe the acquisitions strategy and the latest Sander move inevitably point to an IPO for Prada Group.
“I’m sure the stock market is on Bertelli’s mind if he wants to sustain growth, make new investments and acquisitions for the Prada Group,” Vimercati said. “Pulling Jil Sander off the market may make it easier for him to list the group as a whole.”
Bertelli has been steadily plumping up the group and spent 1999 on an acquisition binge, starting in March with a joint venture with Helmut Lang, picking up steam in August with the controlling interest in Sander and culminating in the spectacular Fendi deal last fall, where Prada and LVMH teamed up to take a 51 percent share for $545 million. Prada then nabbed venerable British shoe company Church & Co. and took a 24 percent stake in its knitwear manufacturer, Manifatture Associate Ponte Felcino.
At a November news conference in Rome held to celebrate the LVMH-Prada-Fendi deal, Bertelli said he’d be slowing down in order to let the new deals settle in. At the time he said that Fendi could go public in 2002 but claimed no plans to do an IPO on his own house. But sources say that could well be last year’s thinking and a public Prada Group — now with over $1 billion in sales — appears more likely. And Bertelli is even said to be hard at work on another acquisition — a medium-sized Italian clothing and accessories brand to round out his stable.
In a typically cryptic statement Thursday, Bertelli described his strategies for Jil Sander AG.
Plans include beefing up “control over distribution and retail…buying back licensed activities, and opening new stores.” The statement added that Jil Sander’s “design division will be reinforced, reflecting the tradition and image” of the Jil Sander brand name. “This strategy will require significant investments and enormous financial resources,” the statement concluded.
Sales for Jil Sander in 1999 are expected to rise 4.2 percent and profits will be flat compared with last year. In 1998, sales had risen 8.6 percent to $117 million, and profits grew 13.8 percent to $6.8 million.
Bertelli has already begun to make big changes at Jil Sander, and retailers — many of whom have spent years and piles of cash on building their Jil Sander businesses — say they are perplexed.
Orders must now be paid for in dollars rather than in deutsche marks and many retailers are already anxious about where certain merchandise will be shipped from, and just how precise the deliveries will be.
“Jil Sander has always been such an extraordinary company, and I think a lot of stores were praying for a status quo situation when the Prada Group bought it. As it stands now, there are a million question marks,” said Janet Brown, owner of an eponymous boutique in Port Washington, N.Y.
“That said, Patrizio Bertelli has paid a lot of money to be the boss at Jil Sander, and we must not take that away from him,” she added.
Brown, a longtime friend of Sander’s who helped introduce the designer to the U.S. market, said retailers aren’t even sure how long they will be able to carry Sander’s collections.
“This is one of the most sensitive twilight zones I’ve ever been in,” said Brown. “One thing is for sure, though: From now on, Bertelli is going to control every segment of the Jil Sander business.”
One retailer, who asked not to be named, said: “What was unusual and magical about the Jil Sander business was that it was a team effort. If you bought a franchise, you paid for it in full because you believed Jil’s future. It was about a team effort, about growing with Jil. What will happen now is anyone’s guess.”
Top management has also left and been replaced by a team of mostly Italian managers chosen by Bertelli.
John Hooks, Jil Sander AG’s international director of sales, quit to join Giorgio Armani SpA and sources here say that Aurelio Giorgini, the former managing director of the company who is now in charge of sales and marketing, plans to leave later this year. Giorgini, reached in Hamburg, declined to comment.
Meanwhile, Bernhard Wirmer, a former executive with Price Waterhouse, has been named chief financial officer of Jil Sander AG.
While Jil Sander AG may be a priority with Bertelli, it’s not his only one.
In addition to other acquisition candidates on the table, Bertelli, fresh from defeat, made a public commitment to race in the next America’s Cup, which starts in 2002.
“In a few days we’ll be outlining our plans for the next Cup. In this America’s Cup we learned two things: that we must win our races, and when that doesn’t happen, we must understand what made us lose.”