Kering agreed to purchase 30 percent of Valentino’s shares from Qatari Mayhoola as part of “strategic deal” that allows the French luxury group to have full control over the Italian fashion house in 2028.
The €1.7bn cash purchase “is part of a larger strategic partnership” between Kering & Mayhoola – the investment vehicle managed by Sheikha Mohammed bin Nasser al Missned – which could result in Mayhoola being a shareholder at Kering.
Kering will have the option to purchase 100% of Valentino within five years.
In a press release, Kering CEO Francois-Henri Pinault stated: “I am delighted with this first stage in our collaboration with Mayhoola in order to develop Valentino.”
Kering has been trying to boost its growth, which is lagging behind that of French rivals LVMH Hermes. Last week, the Paris-based group announced that Gucci’s chief executive would be stepping down. According to sources familiar with the details, Kering purchased high end perfumer Creed last month for €3.5bn. This was 23 times the earnings of the company before taxes, interest, depreciation, and amortization.
Valentino was founded in Rome in 1960. It has 211 stores around the world and last year generated revenue of €1.4bn.
Bernstein analyst Luca Solca stated that the agreement was “promising”, as Kering “has a proven track record in managing and developing fashion brand”. He said: “Valentino can be viewed as the Italian equivalent to Saint Laurent, a business Kering was able create value with.”
Kering’s shares fell by 3.4 percent over the last 12 months. Its market value is now €66.7bn. LVMH shares rose 26.8 percent over the same time period, resulting in a capitalisation amounting to €435bn.
Mayhoola is a vehicle that Qatar’s Emir backs. In 2012, it bought the Roman haute-couture house Permira from a private equity firm for around €700mn. In 2016, it also acquired the French fashion house Balmain.
“We said from the very beginning that we would be talking to Mayhoola. . . Pinault told analysts on a conference call that the collaboration would be expanded to include other areas. He added that specifics were not yet available, but that joint projects would concentrate on the luxury industry.
Kering reported its first-half 2023 results on Thursday. Gucci missed analyst expectations, but saw sales grow by 1% on a comparable base. Gucci accounts for half of Kering’s total revenue.
The total sales increased by 2% to €10.1bn. Operating profit, however, fell by 3% to €2.7bn when compared to the same period last year.
Kering wants to revive Gucci’s fortunes. The new designer Sabato de Sarno will present his first collection this September, and Jean-Francois Palus was appointed interim CEO to replace Marco Bizzarri. Francesca Bellettini, Saint Laurent’s deputy chief executive who oversees all brands, was promoted.
The reshuffle was made shortly after activist investor Bluebell Capital bought a small stake of the luxury group.
Rothschild advised Mayhoola and Centerview on the Valentino transaction.