Published by Global Banking and Finance Review
Posted on January 10, 2025
By Andres Gonzalez and Elisa Anzolin
LONDON/MILAN (Reuters) -Italy's Prada is among the potential suitors looking at fashion group Versace, which has been put up for sale by its parent Capri Holdings, and has been working with Citi to evaluate any bid, a person with knowledge of the matter said on Friday.
U.S.-listed Capri is struggling with falling sales in a global $400 billion luxury sector where confidence has been eroded by wealthy Chinese cutting their spending and the end of a prolonged boom.
In November, Coach-owner Tapestry abandoned an $8.5 billion deal to buy Capri, which also owns brands Michael Kors and Jimmy Choo.
After that deal to create a U.S. luxury conglomerate fell through, Capri executives did not rule out the possibility of a potential sale of its brands.
Capri hired Barclays to look at strategic options including the sale of its Versace and Jimmy Choo brands, two people with direct knowledge of the matter told Reuters. Private equity firms and rival luxury groups are both looked at as possible bidders, one of the sources added.
One person said the entire Capri Holdings group could also be up for sale.
Contacted by Reuters, Prada, Barclays and Citi declined to comment. Capri Holdings was not immediately available for a comment.
Italy's Il Sole 24 Ore first reported that Prada was evaluating a possible bid with Citi. The U.S. bank has worked with the Italian luxury group in the past over a dual-listing project which was put on hold.
Reuters could not establish whether Prada is still evaluating or interested in a possible bid for Versace.
U.S.-listed Capri shares were up about 6% at 1520 GMT. Prada's Hong Kong-listed shares closed down 0.4% on Friday.
"On the positive, one could argue that Versace and Prada cater to very different consumer groups", said Bernstein analyst Luca Solca, adding that Versace has a maximalist aesthetic while Prada has a minimalist one
Bernstein pegs the value of Versace at between $1.75 billion and $2.19 billion, not including debt.
Versace, founded in Milan in 1978 by late Italian designer Gianni Versace and still led by his sister Donatella as creative director, became known for its bold, opulent prints, including the iconic Medusa motif.
Prada, whose rigorous, intellectual style bears the imprint of creative head Miuccia Prada, has been defying the industry's downturn with sales up 18% at constant currencies in the third quarter.
"On the negative, Prada has an abysmal past in M&A", Solca said, citing Jil Sander and Helmut Lang as examples. Prada bought the two labels in the late 1990s and sold them a few years later, with Prada's owner labelling them as "mistakes".
The analyst said another challenge Prada would need to address is the reorganisation of distribution, by reducing the wholesale presence and outlets, and the renewal of Versace's aesthetic.
Versace accounted for a fifth of Capri's revenue in the fiscal year through March 30, 2024. Versace's revenues dropped to $1.03 billion from $1.1 billion one year earlier, with the operating margin declining to 2.4% from 13.7%.
"We see the acquisition of Versace as a challenging turnaround. Therefore, pending further elements, we believe that Prada's real interest in Versace is unlikely", said analysts at Italian broker Equita, doubting a bid would emerge.
Prada's Chief Executive Andrea Guerra said back in May the group was not looking at big acquisitions as it was focused on the brands it already owned.
(Reporting by Andres Gonzales in London, Elisa Anzolin and Sara Rossi in Milan and Mimosa Spencer in ParisAdditional reporting by Samuel IndykWriting by Valentina ZaEditing by Elaine Hardcastle and Frances Kerry)
