Versace close to deal to be bought by Michael Kors: reports
Hallowed Italian fashion house Versace, one
of the few remaining big names in the business under family control, is close
to a deal to be acquired by growing luxury juggernaut Michael Kors, financial
media reported Monday.
Michael Kors, whose roots are in the United States but which is
headquartered in London, could announce a deal as soon as this week, said the
reports, which cited unnamed sources.
The news reports varied on the size of the deal, with some saying 2
billion US dollars and one report at 2.4 billion US dollars. Some accounts said Donatella Versace,
the brand’s iconic leader, would continue to have a role with the company
after the deal.
Donatella Versace, artistic director and vice-president of the group, has
called a staff meeting in Milan for Tuesday, according to the Corriere della
Sera newspaper.
The deal would be the latest push by Michael Kors into high-end luxury
after it bought Jimmy Choo PLC in 2017 for 1.4 billion US dollars. The brand was started
in 1981 and named for its founder, who was born in Long Island, New York.
The transaction would be intended to position Michael Kors more fully as a
competitor to Paris-based LVMH and Kering and the Swiss company Richemont
among global heavyweights in luxury across various product lines, analysts
said.
“The news of Versace’s acquisition by Michael Kors Holdings will come as
quite a shock to followers, admirers and customers of the iconic Italian
brand, which has always been characterized by its fierce narrative and
aesthetic as well as its strong family values and independence,” said a note
from Euromonitor International analyst Florence Allday.
“However, several years of a difficult global luxury climate, declining
growth and stiff competition from brands like Louis Vuitton, Gucci and Dior,
make the sale less surprising.”
Neither Versace nor Kors responded to a request for comment.
Repositioning
Versace was the brainchild of Gianni Versace, who was born in Calabria to a
dressmaker mother and presented his first signature collection in 1978, with
his brother Santo taking care of the label’s business arm.
But the designer, whose bold designs were embraced by Madonna and other
mega-celebrities, was the victim of a bizarre slaying in 1997 by
luxury-obsessed male prostitute Andrew Cunanan in Miami.
Twenty percent of Versace, known for its Medusa head logo, was bought by US
private equity group Blackstone in 2014, and the family owns the rest.
The group boasted sales of 686 million euros in 2016 (760 million US dollarsvv) and
turnover is expected to exceed one billion euros in the “short term,” CEO
Jonathan Akeroyd said in June.
Michael Kors’s sales in 2017 were 4.7 billion US dollars, up from less than 800
million US dollars in 2011 when the company went public.
The company is still especially well known as a maker of handbags and for
its founder who appeared on reality-show “Project Runway.” Michael Kors has
dressed Michelle Obama, Melania Trump and celebrities such as Jennifer
Lawrence and Taylor Swift.
The company has been working closely with Chinese actress and singer Yang
Mi to build brand awareness in that country, executives said in an earnings
conference call in August. The company has opened 24 new stores over the last
year in Asia.
Chief Executive John Idol told analysts in August he was pleased with the
John Choo line’s performance in luxury but said he took his “hats off” to some
competitors in the high-end space who achieved “incredible” growth.
The deal would give Michael Kors the ability to “properly compete with
Kering’s power brand, Gucci,” said Euromonitor analyst Allday, noting that the
consolidation in the fashion creates risks of for smaller brands that stay
independent “of being left behind” and unable “to afford the exposure” of a
bigger company.
A Versace acquisition “would certainly push the group into the big league
in terms of its profile in the luxury space,” GlobalData Retail’s Neil
Saunders said of Michael Kors.
“However, it is also the case that despite its profile, Versace has
struggled to grow sales,” Saunders said. “As such, Michael Kors is not buying
a perfectly performing brand, it is buying a brand that needs work and some
repositioning.”
Shares of Michael Kors fell 7.4 percent to 67.35 US dollarsin afternoon trading in
New York.(AFP)
photo: Versace SS19, Catwalkpictures.com