October 1, 2023

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Kering has agreed to buy 30 per cent of Valentino from Qatar’s Mayhoola, as part of a “strategic” deal that gives the French luxury group the option to take full control of the Italian fashion house by 2028.

The €1.7bn all-cash purchase is “part of a broader strategic partnership” between Kering and Mayhoola, the investment vehicle run by Sheikha Moza bint Nasser al-Missned, which could lead to Mayhoola becoming a shareholder in Kering, the French group said on Thursday.

Kering, which will be represented on Valentino’s board, has an option to buy 100 per cent of the Italian brand within five years.

“I am very pleased with this first step in our collaboration with Mayhoola to develop Valentino,” Kering chief François-Henri Pinault said in a statement.

The deal comes as Kering is trying to accelerate lacklustre growth that has lagged that of French rivals LVMH and Hermes. The Paris-based group last week announced the chief executive of Gucci, its flagship brand, would step down. Last month Kering bought high-end perfumer Creed for €3.5bn, paying 23 times earnings before interest, taxes, depreciation and amortisation for the company, according to people with knowledge of the details.

Founded in 1960 in Rome, Valentino operates 211 stores worldwide and generated revenues of €1.4bn and ebitda of €350mn last year.

Bernstein analyst Luca Solca said the agreement looked “promising” for Kering, which “has an established record managing and developing fashion brands”. He added: “Valentino could be seen as the Italian equivalent of Saint Laurent: a business Kering has been able to create value with.”

Kering shares have declined 3.4 per cent over the past 12 months, giving it a market value of €66.7bn. LVMH shares have risen 26.8 per cent over the same period, leading to a capitalisation of €435bn.

Mayhoola, the vehicle backed by Qatar’s emir, bought the Roman haute couture house from private equity firm Permira in 2012, for about €700mn. It also bought French family-owned fashion house Balmain in 2016.

“From day one in discussions with Mayhoola, we said . . . that we would broaden [the collaboration] to look at other opportunities,” Pinault said on a call with analysts, adding that it was too early for specifics but joint projects would focus on the luxury sector.

Kering on Thursday reported first-half results for 2023, with Gucci missing analyst expectations and growing sales by 1 per cent on a comparable basis. Gucci makes up half of Kering’s total revenues.

Total sales grew by 2 per cent to €10.1bn, while operating profit fell by 3 per cent to €2.7bn compared with same period a year earlier.

Kering is seeking to revitalise Gucci’s fortunes: new designer Sabato de Sarno is to present his first collection in September and Jean-François Palus has been appointed interim chief executive to replace Marco Bizzarri. Saint Laurent’s Francesca Bellettini was promoted to deputy chief executive of the group, overseeing all brands.

The reshuffle came shortly after activist investor Bluebell Capital took a small stake in the luxury group.

Rothschild advised Mayhoola on the Valentino deal and Centerview advised Kering.

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