LVMH Moët Hennessy Louis Vuitton (LVMH.PA), the world’s leading luxury group, and G-III Apparel Group, Ltd. (NASDAQ: GIII), announced on Monday that they have entered into an agreement under which G-III will acquire Donna Karan International, Inc. for $650 million with debt from LVMH. The transaction, an unusual proposal for the French luxury giant, is expected to close in late 2016 or early 2017.
Donna Karan International, Inc. is the parent of the Donna Karan and DKNY brands. Donna Karan founded the brand in 1984 and it went public 12 years later. LVMH acquired the brand in 2001 and decided to reposition it by cutting costs and simplifying the branding.
In an interview, LVMH Fashion Group Chairman Pierre-Yves Roussel said the moves had begun to pay off, but that energizing the DKNY brand was a journey that would have taken time, according to Wall Street Journal.
DKNY’s presence in department stores will be more suitable for G-III than LVMH. G-III has a comprehensive portfolio of over 30 licensed and proprietary brands such as Calvin Klein, Cole Haan and Tommy Hilfiger. “Donna Karan International is an iconic global fashion company,” Morris Goldfarb, Chairman, Chief Executive Officer and President of G-III, said, “Donna Karan brings increased scale and diversification, while providing incremental growth on top of our portfolio of some of the best fashion brands in the world.”
G-III said it preliminarily expects the acquisition to be dilutive in the fiscal year ending January 31, 2018, and accretive thereafter. G-III New York listed stock plunged by 14.45% at the close of trading on Monday.
G-III plans to fund the acquisition through new indebtedness, $75 million of newly issued G-III common stock to LVMH, and a $75 million 6½ year seller note. In connection with the acquisition, G-III has obtained financing commitments from Barclays and JPMorgan Chase Bank, N.A. for a $525 million ABL credit facility and a $450 million 6-year term loan.