Handbag maker Michael Kors (NYSE: KORS) is acquiring the Gianni Versace fashion house for USD 2.1 Billion, including debt, providing Kors a launching pad into the exclusive European luxury market.
Shares of Michael Kors were down slightly near midday Tuesday, after closing down more than 8% Monday when news of the deal leaked.
Following the close of the acquisition, Michael Kors will change its name to Capri Holdings, inspired by an “iconic, glamorous and luxury destination” island, the Company said on Tuesday.
It plans to grow Versace to USD 2 Billion in revenue globally and increase its retail footprint from roughly 200 to 300 stores. It also expects to expand accessories and footwear from 35% to 60% of revenue.
The deal marks one of the first times an American company has cracked the code of super high-end luxury fashion. Michael Kors had already dipped its toes in European fashion last year by buying shoe brand Jimmy Choo for USD 1.2 Billion.
As part of the deal, Donatella Versace, who has helped run the company since her brother Gianni was murdered in 1997, will stay on to oversee the label. Donatella, her brother Santo and daughter Allegra will also stay on as shareholders in the Company. Versace’s management team will continue to be led by its Chief Executive Officer, Jonathan Akeroyd.
That retention will be crucial to Kors as it looks to validate itself to other premium European brands and their visionaries.
“We are all very excited to join a group led by [Michael Kors Chief Executive Officer] 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.
Michael Kors said Tuesday that following the deal, the Company hopes to reduce its proportion of business in the Americas from 66% to 57%, while increasing its European business from 23% to 24% and Asian business from 11% to 19%.