Michael Kors to take control of Italy's Versace

27 September, 2018, 01:09 | Author: Elaine Woods
  • Why Michael Kors Is on the Verge of Buying Versace

Shares dropped Monday on reports that the US-based designer of affordable handbags is eyeing a $2.35 billion acquisition of Italian fashion house Gianni Versace. But the deal would help Michael Kors compete against larger rivals.

Versace does not disclose its financial details, but documents deposited with the Italian chamber of commerce show the Milan-based group a year ago posted sales of €668 million ($1 billion Cdn) and earnings before interest, tax, depreciation and appreciation (EBITDA) of €44.6 million ($67.7 million Cdn).

Till now Neither Versace nor Kors responded to a request for comment.

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.

Reacting to the potential sale, Graham Hitchmough, chief operating officer at Bonsey Design, said that the potential sale of Versace to Michael Kors just represents the latest in a wave of consolidation within the fashion industry.

Four years ago it sold a 20% stake to United States private equity group Blackstone.

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.

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"Blackstone wasn't going to put any more money into it".

Some on social media have argued that the deal would disrespect Gianni Versace, the brand's founder. "They needed a buyer who could make heavy investments".

The Versace family owns the rest of the company. Donatella herself owns 30 percent of the holding, with the remainder in the hands of her brother Santo. A spokesman for Blackstone had no comment.

While she has since recovered and still runs Versace, the company is only modestly profitable, generating about $18 million in profits on $822 million in sales a year ago.

Versace does not disclose its financial details, but documents deposited with the Italian chamber of commerce show that previous year it posted sales of 668 million euros ($786 million) and earnings before interest, tax, depreciation and appreciation (EBITDA) of 44.6 million euros.

Versace had revenue of €686m euros and returned to profit in 2017, according to figures provided by the company.

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