* Blackstone to pay 210 mln euros for 20 pct stake
* Versace family to remain at heart of group
* Plans to IPO in 3-5 years still on the agenda
By Isla Binnie
MILAN, Feb 27 Italian fashion house Versace is
selling a 20 percent stake to U.S. private equity firm
Blackstone for 210 million euros ($287 million), aiming
to fund new shops and build on a recent recovery in sales before
an eventual stock market listing.
The family-controlled brand, which chose pop singer Lady
Gaga to promote it last year, struggled for years following the
murder of founder Gianni Versace in 1997.
While it returned to profit in 2011, it has lacked the cash
to expand rapidly in fast-growing markets abroad.
"This is a very large and very well-known brand so it could
be revived ... but a lot of work has to be done on the creative
side," Exane BNP Paribas analyst Luca Solca said in the wake of
the deal on Thursday.
"The brand has to be updated and they need new ideas. With a
minority stake it might not be possible to make these changes,"
he added, referring to the potential influence of Blackstone.
Versace, which had been gearing up for a listing before
Gianni died, first flagged last April that it was considering
opening up to outside investors.
The family does not want to relinquish control, a
characteristic which has kept other Italian fashion brands like
Giorgio Armani and Missoni in the hands of their founders, but
which some analysts say has hampered their expansion.
"The vision is to maintain independence," Versace Chief
Executive Gian Giacomo Ferraris told Reuters after announcing
Gianni's sister Donatella is creative director and older
brother Santo is company president, while Donatella's daughter
Allegra owns 50 percent of the company and sits on the board.
Ferraris said a planned initial public offering in the next
three to five years was still on the agenda, and Blackstone's
investment would help the brand get there.
"In this intermediate period of time you need a financial
investor, not a strategic investor," said Ferraris, signalling
the company had not wanted a tie-up with another luxury firm or
a more activist private equity investor which might have
interfered with its management.
Mergers and acquisitions have been picking up in the luxury
sector, as a growing number of cash rich buyers from Asia and
the Middle East jostle with global luxury brands and private
equity firms for deals in a growing industry.
Thursday's deal values Versace, whose catwalk show in Milan
earlier this month showed fishtail gowns and 1960s-style shift
dresses, at around 14.5 times expected 2013 core earnings.
This multiple is higher than the luxury sector average of
around 11, but well below the 31.5 times core earnings that
Qatar's royal family paid to acquire Valentino in 2012.
Versace has 137 shops, and plans to reach a total of 200
directly-operated shops within three years, Ferraris said.
By comparison, fellow Italian designer Roberto Cavalli,
whose vivid style is sometimes compared to Versace's, has 179
mono-brand stores, despite making less than half the revenue
Versace expects to post for 2013.
"If you compare with competitors we deserve to be bigger,"
Ferraris said. "That is why we need a little financial help."
Ferraris said the company wanted to open in emerging
markets, where demand for luxury goods remains strong, including
Turkey, Korea and Japan. It shut all its shops in Japan in 2009
to cut costs as losses deepened.
Versace, which was founded in 1978, said it expects to post
2013 core earnings up more than 50 percent to at least 69
Goldman Sachs and Banca IMI advised Versace
on the transaction. Blackstone was advised by Lazard.