Italian fashion house Prada has struck a deal worth $1.375 billion with rival the US group Capri Holdings, Versace on Thursday. The almost 1.4B dollar Versace deal shall include its debt, in a move that unites two of the biggest names in Italian fashion.
Prada wanting to increase its reach with this acquisition and will be able to expand the group with revenues of over six billion euros. The increased revenue could also help it to better compete with LVMH and Kering, the French conglomerates as there is a serious slowdown in luxury demand.
Prada’s Versace acquisition
The Prada and Versace merger works for both as one is looking to expand and the other has suffering losses in the last few quarters. , Prada acquiring Versace will strengthen Italy’s hold, which otherwise is dominated by French conglomerates.
Donatella Versace steps down
Prada and Versace deal came immediately after the announcement that Donatella Versace the chief creative officer was stepping down on March 13. Her late brother Gianni founded Versace.
Donatella Versace said, “Gianni and I have always had a huge admiration for Miuccia, Patrizio and their family,” she said. She added, “I am honoured to have the brand in the hands of such a trusted Italian family business and I am ready to support this new era for the brand in any way that I can”.
Prada on buying Versace
Prada’s Chairman Patrizio Bertelli said, “We aim to continue Versace’s legacy celebrating and re-interpreting its bold and timeless aesthetic.” He added, “At the same time, we will provide it with a strong platform, reinforced by years of ongoing investments and rooted in longstanding relationships.”
Prada buys Versace at reduced price impacted by market turmoil
In 2018, Capri, which also owes Michael Kors and Jimmy Choo, paid €1.83 billion (then $2.1 billion) including debts to acquire Versace. The family then owned about 80% of Versace and 20% was owned by BlackRock, the US investment fund. With the sales of Versace dwindling, Capri had to put it up for sale, and began exclusive negotiations with Prada by February end. Prada’s acquisition of Versace was accepted at a reduced price owning to lower luxury demand and market turmoil caused by tariffs. The earlier valuation of Versace was around 1.5 billion euros ($1.7 billion).
A new chapter in luxury
As per Capri’s CEO John Idol, “This transaction reflects our commitment to increase shareholder value, strengthen our balance sheet and power the future growth of Michael Kors and Jimmy Choo”.
Prada is hoping to attract new customers after the deal and merger with Versace, is known for its baroque-style prints while the Italian fashion house is known for its minimalist style.
“Versace has huge potential. The journey will be long and will require disciplined execution and patience,” said Andrea Guerra, the CEO of Prada.
Prada buys Versace looking for growth
The Italian fashion house, Prada has expanded rapidly and owns other brands like Miu Miu and Church’s shoes. Prada also confirmed that it had committed to 1.5 billion euros of new debt to fund the deal.
Prada is listed in Hong Kong.
Meanwhile, shares of Capri were 3% lower in early trading in New York and down by 24% over the year so far.
