LVMH to Buy Prada’s Fendi Stake
LVMH Moet Hennessy Louis Vuitton, the world’s largest luxury goods company, has agreed to buy Prada Holdings’ 25.5% stake in Fendi to gain control of the Italian fashion company known for its monogrammed handbags and leather goods.
Prada will receive $262 million over four years for its Fendi stake after paying $245 million for it in 1999, according to people familiar with the matter. LVMH, which already owns 25.5% of Fendi, will pay about 80% of the total acquisition price now, the people said, meaning Milan-based Prada won’t realize an immediate gain.
Patrizio Bertelli, Prada’s chief executive, is seeking to pay down about $1 billion of debt after making seven acquisitions in two years, including Jil Sander and Helmut Lang. Declining stock markets and the Sept. 11 terrorist attacks prompted Prada to postpone indefinitely an initial public offering planned for this year.
“The financial resources freed up by this transaction will permit Prada to reinforce its development effort by focusing on brands it fully controls,” Bertelli said in a joint statement with LVMH issued Saturday.
Olivier Labesse, a spokesman for LVMH, and Cristina Fossati, a Prada spokeswoman, declined to comment on the price of the transaction.
Gaining control of Fendi will make it easier for LVMH Chairman Bernard Arnault to direct recovery of Fendi, which had about $70 million in sales last year, analysts have said.
LVMH and Prada bought 51% of Fendi in a joint venture in October 1999. The Fendi family kept the rest of the company and maintained its management role. Since then, Rome-based Fendi has expanded to more than 80 directly managed stores around the world from four when the two companies first bought their stake.
LVMH, the maker of Givenchy fashions and Dom Perignon champagne, among other luxury brands, has lost about 40% of its value in the last year. Shares of most makers of fashion and luxury goods have declined in recent months after many, including LVMH, cut their profit forecasts because of sliding demand caused by the Sept.11 terrorist attacks.