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LONDON – Michael Kors announced Tuesday that he would buy Versace, the Italian fashion house, for $ 2.1 billion to challenge European luxury conglomerates.
The deal, which would end the independence of one of the most prominent fashion brands, is Kors' biggest effort to build an empire.
Kors recently decided to move away from its roots in the "middle market" of the luxury sector. The Michael Kors brand traditionally supports retail outlets and department stores, where discounts are common.
Instead, he has established the high end of retail as his future. Last year, he bought shoe designer Jimmy Choo for 896 million pounds, or $ 1.2 billion at current exchange rates. Versace – whose dresses of flamboyant elegance can sell for thousands of dollars – goes even further in that direction. This will also increase the presence of his new parent in Europe and especially in Asia.
This is the latest example of consolidation in the fashion sector, as traditional players have recovered smaller brands. This year, Ermenegildo Zegna took control of Thom Browne, while Puig took majority control of Dries Van Noten.
Versace, which has been controlled since its founding by the family that gave it its name, has long been considered a target for transactions. In 2014, the company sold a 20% stake in Blackstone Group, the private equity giant, and explored the public market for several years.
Under the terms of Tuesday's deal, Blackstone will sell all of its stake. But the Versace family will remain a shareholder of the merged company and the general director of the Versace brand, Jonathan Akeroyd, will remain in this position. Kors said in its announcement that its goals for Versace included increasing the brand's revenue to $ 2 billion, increasing its number of stores and developing its e-commerce operations.
"This demonstrates our confidence in Versace's long-term success and commitment to this new global luxury fashion group," said Donatella Versace, chief designer of the company and sister of its founder, Gianni Versace.
Kors investors are not convinced by the strategy. Shares of the company fell more than 8% Monday after Transaction reports emerged, and rose 1.4 percent in pre-market trading at 9:20 am EST on Tuesday.
To reflect its growing collection of trophy brands, Kors said it would change its name and become Capri Holdings Limited after the agreement with Versace. The new name, taken from an Italian resort island, was meant to reflect the American fashion house's emphasis on luxury and glamor, while minimizing the use of a single brand.
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