Versace family ready for outside investors

MILAN - Family owned Italian fashion house Versace is ready to sell some of the company to outside investors to help fund expansion in overseas markets such as Asia, its chief executive said.

Founded in 1978 by the late Gianni Versace, the group faces the same dilemma as peers such as Missoni, Roberto Cavalli and Giorgio Armani - keep the business in the family or give up some control in return for the investment needed to catch rivals which have already taken that path.

Italy, whose economy relies heavily on family businesses, has failed to create conglomerates like France's LVMH and PPR because of owners' reluctance to cede control.

"The family is now aware that we need to seize the moment and fund our growth," Chief Executive Gian Giacomo Ferraris told Reuters in an interview on Thursday.

"We are asking ourselves how fast we could go if instead of a Mercedes we owned a Ferrari," Ferraris told Reuters.

Versace, whose glittering gowns are worn by stars such as Lady Gaga and Madonna, raised the prospect of an imminent sale last May when it hired investment banks Goldman Sachs and Intesa Sanpaolo's Banca Imi as advisers.

But concerns over the valuation and control of the company, owned by chief designer Donatella Versace, her 26 year-old daughter Allegra and her brother Santo, have delayed progress, investment sources close to the matter said.

Ferraris, a retail veteran of Gucci and Jil Sander, said the company has set no deadline for any deal and can meet its growth targets without outside help.

He said the company is not currently in talks with potential investors. A stock market listing, like larger peers Prada and Salvatore Ferragamo, could be an option.

"We are aware that it could be a road but not immediately," said Ferraris, who joined Versace in 2009 to revive the then loss-making company.

He hired new staff after cutting a quarter of its 1,300-strong global workforce, revamped loss-making stores and expanded into fast-growing Asia, which now makes over 40 percent of revenues.

Versace has since returned to profit and on Thursday said it expects to hit its 2014 revenue target of $642 million ahead of schedule.

Debt has fallen to $32 million, around a third of the level at the end of 2009, excluding investments in new stores.

FAMILY STAKES

At current valuations for luxury companies of around 15 times EBITDA, Versace may be worth more than $888 million on the basis of its 2012 core earnings.

The company on Thursday said earnings before interest, tax, amortization and depreciation rose 20 percent to $59 million last year.

Versace has 93 stores worldwide, 66 of which are for its top Versace line, whose evening gowns are priced over 6,000 euros.

Total sales rose 20 percent to $526 million last year, above the industry average.

Sales from its own stores maintained that growth rate in the first three months of this year, helped by its focus on Asia and the United States. Sales in Europe rose 7 percent despite the recessions in Italy and Spain.

Global luxury sales growth is estimated to have approximately halved in 2012 from the previous year to 5 percent, measured at constant exchange rates, according to U.S. consultancy Bain. Analysts forecast the sector will grow at between 7 and 9 percent per year from now on.

Ferraris said it was too early to speculate about the size of any sale and declined to comment on what the family may want to do with their holdings.

Allegra Versace, Donatella's daughter who inherited her uncle's 50 percent stake when she was only 11 and joined the board in 2011, could be crucial to any deal. She is currently working as a stylist with no exclusive contract with Versace.

Donatella owns 20 percent and her brother the rest.

The investment sources said the family may prefer to sell a minority stake on the stock market.

One of the sources said Versace has a brand value similar to Valentino, which was bought by Qatari investors last July for a whopping $901 million, or 31.5 times 2011 EBITDA.

But that valuation now appears to be a one-off, the sources said. Ferragamo and Prada were valued at 16 times and 12 times core earnings respectively when they joined the market in 2011.

Notebook maker Moleskine was valued at nearly 15 times its 2012 earnings when it debuted on the Milan stock market on Wednesday, broadly in line with the average of the European luxury sector.

"The main hurdles are valuation, governance and, if the seller remains invested, exit options," Umberto Nicodano, partner of Italy-based law firm Bonelli Erede Pappalardo told Reuters. He is not advising Versace.