An acquisition of Versace by Italian luxury group Prada, opens new tab would create a company with a broader base that is more resistant to business cycles, but reviving the targeted brand could take years and hit short-term profits.
Prada is seeking to expand after posting strong organic sales growth in the last nine months of 2024 despite a slowdown in demand, while Versace operates at a loss. A merger would be Italy's answer to the French conglomerates that dominate the luxury business.
Capri Holdings, opens new tab, which owns Versace, is working with Barclays to explore a sale of the brand, sources have said.
WORK NEEDED
Prada, listed in Hong Kong but controlled by designer Miuccia Prada and her husband Patrizio Bertelli, has the right skills to address Versace's shortcomings in manufacturing, marketing strategy and running of directly owned shops.
It also has the leather goods skills needed to develop that part of the business, which never took off.
"Versace has not expressed all the potential it had under Capri's management. Prada has the credentials for a relaunch," Ortelli said.
Capri, previously known as Michael Kors, bought Versace more than six years ago for 1.8 billion euros.
Versace, with its bold maximalist aesthetic, would bring a new segment of customers to Prada, known for its minimalist style.
"Prada's interest in Versace probably also derives from the desire to make its business less cyclical from a fashion point of view, since it would bring on board a brand with a very different profile," UBS analyst Susy Tibaldi said in an interview.
Turning Versace around could take several years, Tibaldi said.
"There is a lot to rebuild," she said, citing, for example, Versace's widespread discounts and wide range of products, not all of which can be called luxury items. "If you can get this type of asset for an attractive price, the potential is very significant."
A sign of Versace's potential is its license portfolio, which has a retail value around $2 billion, she added.
Versace is expected to report revenues of $810 million in its fiscal 2025 ending in March, down from the previous year. It had operating losses in the last three quarters.
"We would not applaud the acquisition of Versace by Prada," BNP Paribas said. "However, in light of Prada's (recent) share price underperformance, we believe potential risks around this deal have been mostly priced in."
GENERATIONAL CHANGE
Prada ended 2023 with a net cash position of 197 million euros, after a significant outlay on real estate investments.
Analysts expect the group, which releases its financial results on Tuesday, to have over 500 million euros in net cash at the end of 2024. This would need another 1 billion euros in financing, which would be sustainable for the group, analysts said.
Prada is eyeing Versace as both companies face questions about the future.
In 2023 Prada appointed former Luxottica chief Andrea Guerra as its CEO, replacing Patrizio Bertelli and Miuccia Prada, to ease a transition to the next generation of the founding family.
Speculation is rife about changes to Versace's creative leadership, a role held for over 25 years by Donatella Versace.
At the end of 2024, fashion trade publication WWD reported that her contract was due to expire in February and that its renewal was uncertain.
Ukrainian President Volodymyr Zelenskyy arrived in Poland on Thursday following a summit of the European Council in Brussels....
The U.S. military carried out large-scale strikes on dozens of Islamic State targets in Syria on Friday in response to an attack last week that killed...
US intelligence assessments indicate that Russian President Vladimir Putin continues to seek full control of Ukraine and to expand Russia’s influenc...
AnewZ has premiered The Oligarch’s Design, a long-form investigative documentary marking the launch of AnewZ Investigations, the channel’s new edi...
UN Secretary-General Antonio Guterres has issued a stark warning over the humanitarian situation in the Gaza Strip....
Vietnamese authorities have confiscated thousands of counterfeit luxury products, including fake Rolex watches and Prada handbags, during a raid at Saigon Square Shopping Mall in Ho Chi Minh City, state media reported Friday.
Italian fashion house Prada has agreed to acquire Versace from Capri Holdings in a $1.375 billion deal, aiming to boost its presence in the global luxury market and revive the iconic but struggling brand.
Donatella Versace is to step down as the main designer for the Versace brand after almost three decades, a move that has fanned talks of a sale of the business to rival Italian fashion house Prada.
Prada is reportedly exploring the acquisition of Versace, with Capri Holdings considering the sale of its luxury brands, including Jimmy Choo, as it refocuses on Michael Kors. The potential deal comes ahead of Donatella Versace's contract expiration in February 2025.
Ukraine has welcomed the European Union’s decision to provide €90 billion in support over the next two years, calling it a vital lifeline even as the bloc failed to reach agreement on using frozen Russian assets to finance the aid.
European Union foreign policy chief Kaja Kallas has warned that attempts to reach a peace agreement in Ukraine are being undermined by Russia’s continued refusal to engage meaningfully in negotiations.
Chinese Foreign Minister Wang Yi has held a phone conversation with his Venezuelan counterpart Yvan Gil at the latter’s request.
Belarusian President Alexander Lukashenko has confirmed that Russian-made Oreshnik missile systems have been deployed on Belarusian territory and placed on combat alert.
The European Union has postponed signing its long-awaited free trade agreement with the Mercosur bloc until January, after failing to secure sufficient backing from member states, according to media reports.
Warner Bros Discovery’s board rejected Paramount Skydance’s $108.4 billion hostile bid on Wednesday (17 December), citing insufficient financing guarantees.
Ford Motor Company said on Monday it will take a $19.5 billion writedown and scrap several electric vehicle (EV) models, marking a major retreat from its battery-powered ambitions amid declining EV demand and changes under the Trump administration.
Iran has rolled out changes to how fuel is priced at the pump. The move is aimed at managing demand without triggering public anger.
U.S. stock markets closed lower at the end of the week, as investors continued to rotate out of technology shares, putting pressure on major indices.
The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) cut its benchmark interest rate by 25 basis points to a range of 3.50% to 3.75% following its two-day policy meeting, according to an official statement issued on Wednesday, 10 December.
You can download the AnewZ application from Play Store and the App Store.
What is your opinion on this topic?
Leave the first comment