Permira eyes Hugo Boss

Permira is in exclusive talks with members of Italy’s Marzotto family regarding extending its stake in Valentino Fashion Group, owner of luxury fashion brands including Marlboro Classics, Missoni and a controlling stake in Germany’s Hugo Boss.

A source close to the deal said late on Friday May 18 that Permira had entered exclusive negotiations for a further 24% stake in Valentino, following the acquisition of a 29.6% stake for €35 per share, totalling €580m, earlier in the week. The exclusive negotiations end on May 28.

Permira’s move seems to have ended any possibility of a takeover bid by US buyout firm Carlyle Group, which declined to confirm or deny whether it had been in talks with Valentino chairman Antonio Favrin, who owns a 20% stake. It is uncertain whether Carlyle would have attempted to work with Permira or buy out its stake.

The two firms last worked together, alongside Blackstone Group and TPG Capital, in the US$17.6bn buyout of US semiconductor business Freescale in September 2006. TPG Capital was linked in 2001with a takeover bid for Valentino that never materialised.

London-based Permira is understood to be talking to Marzotto brothers Luca, Gaetano, Stefano and Nicolo, who hold a 12.4% stake through their Tidus vehicle. Luca Marzotto told Thomson Financial this week that no decision had yet been made regarding a sale to Permira and rejected speculation that the brothers were waiting for a counter-offer.

If the negotiations are successful, Permira will offer €35 per share, and will be forced under Italian and German stock market regulations to launch a full takeover bid for both Valentino and Hugo Boss if it increases its stake beyond 30%.

Hugo Boss is believed to be Permira’s key target, as the German clothing label accounts for about 70% of Valentino’s sales, according to analysts at Dresdner Kleinwort. Hugo Boss has a market capitalisation of approximately €3.5bn.

The Marzotto family, which has a background in the textiles business dating back to the early nineteenth century, bought its stake in Valentino for €240m in 2002, having earlier acquired its controlling share of Hugo Boss for approximately US$165m in 1991.

Permira’s other interests in the fashion retail sector include UK chain New Look, currently on the auction block and understood to be attracting interest from Blackstone, France’s PAI Partners and partnerships of CVC Capital Partners and Middle East retailer Landmark Group, as well as TPG Capital and Warburg Pincus, with bids of up to £2bn expected by the end of May; Spanish clothing retailer Grupo Cortefiel; Germany’s Takko ModeMarkt; and Switzerland’s Vogele Group.

Robert Venes