Michael Kors to buy luxury label Versace

Michael Kors, best known for its leather handbags, has agreed to buy Italian luxury designer Versace for $2.12 billion (Dh7.8bn) in a deal that will bring the US fashion group access to the European luxury market.

The company plans to increase Versace’s sales to $2bn annually, boost its retail footprint to 300 stores globally from about 200 at present and accelerate its e-commerce development, Michael Kors said yesterday. Under the agreement, it will rename itself Capri Holdings.

“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,”said John Idol, chairman and chief executive of Michael Kors Holdings.

Michael Kors has highlighted its ambitions to grow its portfolio of luxury brands after buying UK’s high-heel shoe maker Jimmy Choo in a deal valued at $1.2bn last year.

The global personal luxury goods market is expected to grow 6 to 8 per cent to reach up to €281bn (Dh1.21 trillion) this year, according to a June report by Bain & Co.

Chinese consumers continue to drive demand in the industry as they become more fashion-savvy and digitally advanced, the report said.

As part of the deal, the Versace family, which owns 80 per cent of the fashion house through the holding company Givi, will receive €150 million of the purchase price in Capri’s shares.

US private equity firm Blackstone, which owns 20 per cent of Versace, will cash out as part of the deal, according to media reports.

The acquisition is expected to close in the fourth quarter of the fiscal year, subject to conditions and regulatory approvals, Michael Kors said.

Donatella Versace, who has helped to run the company since her brother Gianni was murdered in 1997, will stay on to lead “the company’s creative vision,” Mr Idol said.

Ms Versace is the artistic director and vice president of the Milan fashion group. Versace chief executive Jonathan Akeroyd will continue to head the company.

“We believe that being part of this group is essential to Versace’s long-term success. My passion has never been stronger,” Ms Versace said.

Under the terms of the deal, Michael Kors will acquire all of the outstanding shares in Versace for $2.12bn that will be funded by cash, an existing revolving credit facility, bank loans and shares in Capri Holdings.

Following the deal, Michael Kors aims to reduce its share of business in the Americas to 57 per cent from the current 66 per cent, increase its European business to 24 per cent from 23 per cent and boost its Asian business to 19 per cent from its 11 per cent figure at present.