Prada may soon acquire Versace for $1.6B
What's the story
Italian luxury fashion house Prada is said to be close to a deal to buy compatriot fashion brand Versace from Capri Holdings Ltd.
The deal is being proposed at a price of around €1.5 billion ($1.6 billion).
The Milan-based company and Capri are likely to finalize the deal within this month, after successful preliminary evaluations that found no major risks.
Market impact
Prada's potential acquisition could reshape Italian fashion landscape
The acquisition of Versace, founded by designer Gianni Versace in 1978, could greatly change the Italian fashion market.
It would create a bigger domestic player that could compete more aggressively with global luxury groups such as LVMH and Kering.
The move also marks a reversal of decades-long trends where Italian luxury brands were mostly acquired by foreign competitors.
Sales surge
Prada's financial performance despite market downturn
Despite a global downturn in high-end fashion items, Prada has been able to thrive.
The company's sales surged in the third quarter of last year, largely due to its Miu Miu brand which is favored by younger consumers.
This robust performance underscores Prada's resilience and potential for growth even amid challenging market conditions.
Market position
Prada's market capitalization and comparison with competitors
Even if Prada acquires Versace, its market cap would remain far behind its rivals.
The Hong Kong-listed fashion house has a market cap of HK$169.4 billion ($21.8 billion) after a 10% share increase since the beginning of this year.
French conglomerate LVMH has a market value of €347.5 billion and owns several Italian brands including Fendi and Loro Piana.
Financial challenges
Versace's recent financial performance and Capri's portfolio
Versace posted a revenue of $193 million in the third quarter of the ongoing fiscal year, a 15% year-on-year drop.
Meanwhile, the brand's operating loss also increased to $21 million from $14 million during the period.
Capri Holdings Ltd., which also owns Michael Kors, has hired Barclays to consider options for some of its portfolio companies after an $8.5 billion merger with Tapestry Inc. was blocked by a court order.