Michael Kors’ $2.12bn acquisition of Versace

By Gustaf Baavhammar, Lukas Bruell, Christopher Leung (University of Warwick) |

14/12/2018

 

Overview of the deal

  • Acquirer: Michael Kors. Advisors: J.P. Morgan, Barclays

  • Target: Versace. Advisors: Goldman Sachs, Lazard

  • Estimated value: $2.12bn

  • Announcement date: 25th September 2018

Michael Kors’ acquisition of Italian luxury fashion house Versace comes at a time of heated consolidation within the luxury domain and reflects Michael Kors’ largest effort yet to challenge Europe’s fashion conglomerates, namely LVMH and Kering S.A, by building an empire of its own. With the acquisition ending the independence of one of the last family run fashion brands, the path to building America’s first luxury conglomerate begins as Michael Kors Holdings evolves into Capri Holdings.


The American based fashion group managed to secure Versace over competitive conglomerate Tapestry Inc., who owns Coach and Kate Spade, in a deal worth $2.12 billion including debt, representing 2.5x the brand’s current revenue and 22x EBITDA. Funded by a combination of cash, debt and shares in Michael Kors Holding Ltd, the group has agreed to purchase all of Versace’s outstanding shares in a primarily cash deal which is expected to close in the fourth quarter of 2019.


The deal is a case of a horizontal merger, with Michael Kors and Versace both selling goods in the luxury fashion market, albeit in different spectra and with different target clientele and regional focus. Versace brings heritage that is unmatched by either Michael Kors or Jimmy Choo; yet Versace suffered from under-development and only managed to return to profitable ways last fiscal year. Both brands under the umbrella company Capri Holdings will continue to operate as separate entities, with Versace CEO Jonathan Akeroyd to maintain his leadership, and Versace’s creative arm still under the direction of famed Chief Designer Donatella Versace, sister of founder Gianni Versace.

“Versace is terribly under-developed. That is going to change with the resources of Capri behind them.” –John D. Idol, CEO of Michael Kors Holding Ltd

Company details (Michael Kors)

Michael Kors is an American luxury fashion house bearing a household name status ubiquitous for its affordably priced accessories, particularly handbags.

-Founded in 1981, headquartered in New York City

-President & CEO: John D. Idol

-Number of employees: 14,846 (as of 31 March 2018)

-Market Cap: $7.53bn -EV: $8.13bn

-LTM Revenue: $5.03bn -LTM EBITDA: $1.17bn

-LTM EV/Revenue: 1.60x -LTM EV/EBITDA: 6.95x


Company details (Versace)

Versace is an Italian luxury fashion company, representing the epitome of Italian glamour, producing ready-to-wear and leather accessories.

-Founded in 1978, headquartered in Milan

-President & CEO: Jonathan Akeroyd

-Number of employees: 1,500

-Market Cap: N/A* -EV: N/A

-LTM Revenue: €686m -LTM EBITDA: €15m

-LTM EV/Revenue: N/A -LTM EV/EBITDA: N/A

* Not available due to Versace’s private ownership