In a bold move to establish itself as one of the biggest fashion conglomerates in the Western Fashion Industry, Michael Kors Holdings acquired the Milanese luxury fashion house Versace in an aggressive US $ 2.1 billion deal under the leadership of John Idol, Michael Kors Holdings’ Chairman and CEO.
This comes along another big news that Michael Kors Holdings is now being renamed to Capri Holdings stating this new name is as an inspiration taken by an “iconic, glamorous and luxury destination”. This move is similar to Coach’s transformation to Tapestry Inc. after it bought Kate Spade last year.
Idol recently revealed that the company would put any acquisitions on hold until the post-deal debt load is paid and Versace grows to be a US $ 2 billion brand under Kors’ umbrella, once the Versace deal is closed in the fourth quarter,
When the word of deal broke the internet on Monday, the company lost 8.2 percent shares, most of which was regained as investors supported the deal by pushing Kors’ stock up 2 percent to $68.01 yesterday.
Kors will be playing about 176 million dollars in the form of Capri shares which amount to 1.7 percent of the company. The rest will be paid via cash on hand, existing credit facility and bank loans from Kors’ advisers J.P. Morgan Chase Bank and Barclays.
Consumers have taken to the internet to share their mixed opinions on the acquisition. It is a blatant reality that heritage fashion houses are diminishing as independent entities and are being acquired by conglomerates like Tapestry and Capri. The same is being feared for the legacy of the creation of Gianni Versace of how the European fashion heritage is being taken over by an American conglomerate. On the other hand, a section of these consumers believe that Versace will now grow further under Kors as Donatella remains the Creative Director of Versace and the Versace family still owns 20% stake in the company.
After acquiring Jimmy Choo, Kors recorded sales of US $ 5 billion in the past year as per S&P Capital IQ and is anticipated to increase the number and log revenues as high as US $ 850 million this year from US $ 350 million in 2010.
Idol further added, “You can see other Italian luxury groups, which I won’t name, that achieved far greater revenues than that in a very short period of time. First and foremost we will focus on the brand’s iconic message, and that’s going to be led by Donatella and we will follow her lead. The focus is on the Italian heritage of luxury and craftsmanship. Made in Italy is very important and you will see it even more. We will move much more quickly, opening stores, an e-commerce platform and really capitalize on the brand’s enormous reputation around the world. I think you will see us do that in a relatively short period.”
“We gave the goal of $1.2 billion in the next three years, it’s a pretty rapid growth in a very short period of time and we will focus on doing that first,” he added. “We’ll let the consumer speak to us on when we get to the $2 billion. It’s very within our reach, we know that, we see it and you can measure that [against] other luxury and heritage brands from Italy.”
It’s still a game of guess if this bold acquisition will cost Kors or eventually result in the growth of both the parties- Michael Kors, now Capri and Versace.