October 22, 2018

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Michael Kors to Buy Versace for $2.1 Billion and Change its Name to Capri Holdings

Michael Kors to Buy Versace for $2.1 Billion and Change its Name to Capri Holdings

 

Michael Kors makes an entry into the exclusive high-end European luxury market after reaching a deal to buy Gianni Versace for $2.1 billion. After the acquisition, it will be called Capri Holdings.

The name ‘Capri Holdings’ is inspired by an ‘iconic, glamorous and luxurious destination island,’ the company said on Tuesday.

Michael Kors hopes to grow Versace global revenues to $2 billion and increase its retail footprint from 200 to 300 stores. It also plans to expand the footwear and accessories market from 35% to 60% revenue.

This is the second major buy of a European high-end luxury brand by Michael Kors in the last 2 years. Last year, it bought the shoe brand, Jimmy Choos for $1.2 billion.

As part of the deal, Donatella Versace will stay on to manage the label. Her brother Santo and daughter, Allegra will also stay on as shareholders in the company. Versace will still keep its management team, led by its CEO, Jonathan Akeroyd.

‘We are all very excited to join a group led by (Michael Kors CEO) John Idol, whom I have always admired as a visionary as well as a strong and passionate leader. We believe that being part of this group is essential to Versace’s long-term success,’ Donatella said, as part of the company statement on Tuesday.

The move is lauded as a good diversification strategy for the American brand in defense of the next economic downturn, more than a decade after the last one in the U.S. Those with the means to spend on a luxury Versace dress are more likely to spend during a recession than those who shop more affordably, industry experts say.

Michael Kors said Tuesday that following the deal, the company plans to increase its interests in Europe and Asia from 23 percent to 24 percent, and 11 percent to 19 percent respectively.

The global market for personal luxury goods was estimated to be worth $307 billion in 2017, according to recently filed registration documents for the luxury marketplace, Farfetch marketplace. This luxury market is expected to reach $446 billion by 2025, according to data.

Private equity firm Blackstone, which owns 20 percent of Versace, will cash out as part of the deal.

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