Kors acquires Versace

Under the deal announced on Tuesday, Michael Kors will buy all of Versace's outstanding shares for a total enterprise value of €1.83 billion ($2.12 billion), to be funded in cash, debt and shares in Michael Kors Holding.

US private equity firm Blackstone, which bought 20 percent of Versace back in 2014, will fully exit its investment. Moreover, the Versace family, which currently owns 80 percent of the fashion house, will receive €150 million of the purchase price in shares of the Michael Kors Holdings.

Donatella Versace, sister of the company's late founder, and artistic director and vice-president of the Milan-based group said that being part of the new group was "essential to Versace's long-term success."

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After the deal, Versace CEO Jonathan Akeroyd would remain at the helm of the company, said Michael Kors Chairman and Chief Executive John D. Idol, adding that Donatella Versace would continue to lead "the company's creative vision."

"We believe that the strength of the Michael Kors and Jimmy Choo brands, and the acquisition of Versace, position us to deliver multiple years of revenue and earnings growth," Idol said.

Fashion house sell-out

Versace is latest independent European runway brand to decide to sell in recent months. Italy's Missoni family announced an agreement to sell a minority stake of its brand to a private equity venture backed by the Italian state before the summer, and Antwerp-based Dries Van Noten sold a majority stake to Spanish luxury group Puig in June.

Versace, known for its bold and glamorous designs and its Medusa head logo, has become the target of a big-ticket investor at a time when the luxury industry is riding high on strong demand from China.

Versace does not disclose its financial details, but documents deposited with the Italian chamber of commerce show that last year it posted sales of €668 million and earnings before interest, tax, depreciation and appreciation (EBITDA) of €45 million.

Yet, the fashion house is apparently too small to survive on its own, as globalized markets are rewriting luxury business strategy in the favor of multinationals with deep pockets and access to new creative talents.

Expansion and a new name

Meanwhile, the US group has announced it plans to grow Versace's global sales to $2 billion (€1.7 billion) globally, boost its retail footprint to 300 stores from around 200 at present and accelerate its e-commerce strategy. In addition it wants to raise the share of higher-margin accessories and footwear to 60 percent of sales from 35 percent currently.

The group also said it would be renamed Capri Holdings following the closing of the deal, which is expected by next May. "The name is inspired by the fabled island which has long been recognized as an iconic, glamorous and luxury destination," a Michael Kors statement said.

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The Versace deal marks the most ambitious attempt yet by Michael Kors to create a US rival to European luxury conglomerates LVMH, Kering and Richemont. Last year, the US group — best known for its leather handbags — already bought British stiletto-heel maker Jimmy Choo for $1.2 billion.

uhe/jd (Reuters, AFP, dpa)