Upscale Italian fashion house Prada Group sees growth potential across categories and geographies for Versace, the fellow Italian luxury brand that it is acquiring for $1.4 billion.
Versace's parent, Capri Holdings, on Thursday said it had entered into a definitive agreement to sell the brand to Prada. The deal reportedly closed at a lower price tag than originally planned — because of the current trade wars and market turmoil — and at a far lesser price than the $2.15 billion Capri paid for the company in 2018. The sale is expected to close in the second half of the year.
"Within the Prada Group, Versace will maintain its creative DNA and cultural authenticity, while benefitting from the full strength of the Group’s consolidated platform, including industrial capabilities, retail execution and operational expertise," Prada said in a statement.
The Versace sale comes as the global luxury retail sector is seeing pressure and uncertainty as Donald Trump's tariffs roil stock markets around the globe. At least one retail analyst expects that Versace will be a much better fit for Prada than it ever was for Capri, which also owns Michael Kors and Jimmy Choo. The deal will also add scale and clout to Prada's operation, in the face of huge French luxury conglomerates such as LVMH and Kering.
There were 234 Versace stores as of the end of last year, according to a Capri securities filing. In addition to Michael Kors and Versace, Capri owns high-end footwear maker and retailer Jimmy Choo. Prada's portfolio includes not only Prada but also Miu Miu and Church Footwear, among other brands.
'Value destructive'
"The deal is likely good for Versace as it removes it from the control of Capri, which has failed to grow the brand and develop the business," Neil Saunders, a retail analyst and managing director at analytics firm GlobalData, said in an email to CoStar News.
"While Capri is celebrating the sale, the reality is it has very little to be satisfied with as the price paid by Prada is well below what it originally bought Versace for," he said. "The deal has essentially been value destructive for Capri. For Prada, this is a win as it gives them access to a different part of the luxury market, which is important at a time when the luxury space is slowing down. They will need to take care to maintain the aesthetic and originality of Versace."
Capri didn't respond to an email from CoStar News seeking a comment on Saunders' remarks.
But Prada described Versace as a "unique and relevant luxury brand with strong growth potential" in a presentation for investors. It added that the brand will have scalable growth, "efficiency and long-term value creation" through its access to Prada's resources, namely "best-in-class supply chain, retail network and global capabilities."
Prada has "significant runway for growth across categories, geographies and channels," according to the presentation.
Versace, known for its Medusa logo and colorful prints, was founded by now-deceased fashion designer Gianni Versace. Capri bought the business from the Versace family and Blackstone, but it hasn't flourished under the new ownership. Last month, Capri announced that Donatella Versace was exiting as chief creative officer.
Tapestry deal scuttled
Capri's prior effort to cement its position as a global fashion power was derailed. Tapestry — parent of Coach and Kate Spade — unsuccessfully attempted to acquire Capri for $8.5 billion, but federal regulators nixed the merger. And because of concern over tariffs and stocks, the Versace sale price ended up being below the company's original valuation of about $1.7 billion, according to various media reports.
“The acquisition of Versace marks another step in the evolutionary journey of our group, adding a new dimension, different and complementary," Prada CEO Andrea Guerra said in a statement. "The group’s infrastructure is strong, we have verticalized our brands’ organizations and reinforced our routines and processes. We feel ready to open this new chapter. Versace has huge potential. The journey will be long and will require disciplined execution and patience. The evolution of a brand always needs time and constant focus."
In the fiscal third quarter, Versace's revenue dropped 15% to $193 million compared to the prior-year period. Retail sales decreased in the mid-teens percent while wholesale revenue declined in the double-digits. Versace had an operating loss of $21 million compared with an operating loss of $14 million in the prior year.
For the record
Barclays is serving as Capri Holdings Limited’s financial adviser and Wachtell, Lipton, Rosen & Katz is its legal adviser. Citigroup Global Markets Europe AG and Goldman Sachs Bank Europe SE, Succursale Italia are serving as financial advisers. Skadden, Arps, Slate, Meagher & Flom is serving as legal counsel to Prada Group. BNP Paribas and Intesa acted as underwriting banks for the financing.