MILAN – Kering agreed to buy a 30 per cent stake in fashion house Valentino for €1.7 billion (S$2.48 billion) in cash as growth at Gucci, its biggest brand, continues to sputter.
The French company has the option to purchase the rest of Valentino from its owner, Qatar’s Mayhoola, before the end of 2028, the groups said on Thursday. The deal is part of a strategic partnership that could lead to Mayhoola taking a stake in Kering, they said.
Kering has struggled to keep pace with luxury rivals, especially LVMH, amid a boom in the fashion business that has helped transform the bigger French firm into the most valuable company in Europe.
In June, Kering agreed to buy perfume maker Creed from funds controlled by BlackRock and chairman Javier Ferran.
The acquisitions show chief executive Francois-Henri Pinault’s urgency to close the gap with its rival. Activist investors including Bluebell Capital Partners are circling the French luxury group, with Kering sounding out defence advisers, Bloomberg reported earlier in July.
The Valentino deal “is a major positive at a decent multiple, and a sound fit to help accelerate growth during a transition period for the Gucci brand”, Bloomberg Intelligence analyst Deborah Aitken said in a note.
The brand had revenue of €1.4 billion in 2022 while earnings before interest, taxes, depreciation and amortisation came in at €350 million. It operates 211 stores in more than 25 countries, according to the companies.
Valentino, whose red carpet designs have been worn recently by stars ranging from actresses Zendaya to Florence Pugh, was founded in Italy in 1960 and acquired by Qatar’s Mayhoola for Investments SPC more than a decade ago. Mr Pinault told analysts he believes Kering can boost the brand’s profitability.
A Kering holding by Mayhoola would mark another prominent French investment for Qatari firms, which have snapped up assets in recent years, including the Paris Saint-Germain football club.
Gucci sales rose just 1 per cent in the second quarter on a comparable basis, the company said on Thursday, well behind the 4.2 per cent gain analysts expected.
Kering, which gets two-thirds of it profit from the brand, has already shaken up leadership to revive its appeal.
Last week, the company announced the impending exit of Gucci CEO Marco Bizzarri, to be replaced on a temporary basis by Mr Jean-Francois Palus, a trusted lieutenant of Mr Pinault.
Kering will start a search for a permanent Gucci CEO from September, Mr Pinault said.
That follows the November exit of creative director Alessandro Michele, whose flamboyant designs had fallen out of favour. Mr Michele was replaced by Mr Sabato de Sarno, a former Valentino designer who is expected to unveil his debut collection in September in Milan.
The agreement with Mayhoola was done “quite fast”, and the goal was to sign the deal before the summer, Kering chief financial officer Jean-Marc Duplaix told analysts in a call. BLOOMBERG
