LVMH to Pay $450 Million for Donna Karan License
LVMH Moet Hennessy Louis Vuitton, the biggest luxury-goods company, agreed Monday to pay $450 million for the rights to Donna Karan’s brands and offered to buy the New York designer’s namesake company for $195 million.
LVMH, whose portfolio of labels include Christian LaCroix, Emilio Pucci, Fendi, Givenchy and Marc Jacobs, is seeking a bigger share of the U.S. fashion market.
The license holder for the Donna Karan New York and DKNY brands is Gabrielle Studio Inc., owned by Donna Karan and her husband, Stephan Weiss.
They also own 23.7% of Donna Karan International Inc., the company that makes and sells clothing for the brands. LVMH offered $8.50 a share in cash for that business, 74% more than the closing price Friday.
Donna Karan International shares soared $3.63, or 74%, to close at $8.50 on the New York Stock Exchange. The stock had lost more than four-fifths of its value since its initial sale in June 1996.
The purchase is LVMH’s 15th this year, as Chairman Bernard Arnault competes with rivals such as Gucci Group to buy luxury products and profit from selling them through its global retail network. The Donna Karan deal is LVMH’s largest investment in the U.S. fashion industry to date.
Donna Karan, which has 95 shops across the U.S., had sales of $611.8 million in 1999. LVMH sales totaled $7.64 billion last year.
LVMH wants to open more Donna Karan stores outside the U.S., where 70% of sales are now. Karan will remain chief designer for her brands. “We sought out Donna Karan,” said LVMH Managing Director Myron Ullman. “It’s a U.S.-based brand that has lots of global potential.”
Donna Karan International said its board will consider the bid. If it succeeds, the price for Gabrielle will be reduced by $50 million, Ullman said. The two companies would be combined within LVMH.
LVMH said Karan and Weiss would buy shares in the combined Donna Karan International and Gabrielle operation in addition to exchanging a “significant portion” of their DKI stake for shares in the combined business.
Donna Karan in 1997 relinquished daily oversight of the company to John Idol, a former Polo Ralph Lauren Corp. executive, to help rein in the company’s costs and boost sales. The company has said that it is on track to meet analysts’ estimates for 2000, but expects 2001 earnings to be below the Wall Street consensus.
The company’s American depositary receipts closed off 19 cents at $12.75 on Nasdaq.
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Design Deal
Shares of Donna Karan International soared $3.63, or 74%, to close at $8.50, its highest close since early February, on news of its sale to LVMH. The company went public three years ago at $24.
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DK, monthly close and latest on the New York Stock Exchange
Monday: $8.50, up $3.63
Source: Bloomberg News
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Associated Press contributed to this report.
