PRADA BUYS JIL SANDER
Byline: Samantha Conti
MILAN — Prada’s Patrizio Bertelli has finally captured the prize he’s been after for more than three years: Jil Sander AG.
In a fusion of two of fashion’s most powerful brands, Prada and Jil Sander both issued statements late Monday evening saying the Italian company had purchased a controlling stake in Jil Sander. Prada acquired 75 percent of the firm’s common shares and 15 percent of its bourse-traded preference shares.
Sander owned just over half of the company’s 250,000 shares and had full voting rights. The remaining, nonvoting shares are quoted on the Frankfurt stock exchange. Monday’s development confirms a report in these columns, Aug. 18.
Prada’s purchase marks the birth of Italy’s first, privately owned luxury goods group. The stable, though small, now boasts, in addition to Prada and Sander, joint ventures with Helmut Lang and Italian eyewear maker De Rigo, and an 8.5 percent stake in the British footwear company Church & Co.
Both Prada and Jil Sander said Germany’s securities and exchange commission was expected to approve the deal sometime next month. Neither company named the purchase price.
“Jil Sander and Prada Holding BV will work together closely in the future,” the Sander statement said. “Prada Holding BV is taking over 75 percent of the common shares and 15 percent of the bourse-listed preference shares in our company from Ms. Jil Sander,” the statement continued.
The companies said Sander would remain chief executive and continue to be responsible for the design and styling of all Jil Sander products. Prada Holding BV chief executive Bertelli will become Sander’s supervisory board chief.
“The integration into the Prada group will free considerable synergies and opens for Jil Sander AG great possibilities, especially in the accessory division,” Sander said in the statement. She added that she would be able to concentrate her energies on design and styling.
Although Bertelli had been on Jil Sander’s trail for more than three years, it was only a few months ago that the two started talking seriously. “It took him a long time to woo her,” one source said. “He just kept insisting, and offered her a number of different proposals.”
The two signed a letter of intent earlier this month and made their final decision in Hamburg on Monday.
Bertelli beat out a number of other suitors: Sources say that LVMH was also after the German company and a host of top-flight European banks were interested in buying Jil Sander.
“She had so many offers,” another source said. “Selling the company to Prada was not a question of money; it was more a question of synergies and of Sander’s desire to focus on the creative aspects of the business.”
Bertelli, Miuccia Prada’s husband and the company’s managing director, could not be reached for comment Monday, which is not surprising, given his generally standoffish relationship with the news media. “In this business, there needs to be less chatter and more work,” he said in a recent interview with WWD.
The Jil Sander deal is the latest chapter in Bertelli’s aggressive growth campaign. Last spring he formed the joint venture with Helmut Lang to promote Lang’s name worldwide and set up a name-brand retail network for the designer. He also formed the joint venture with De Rigo for the production of Prada eyewear.
And, as reported, Bertelli purchased an 8.5 percent stake in Church & Co. earlier this month.
Bertelli’s goal is simple: unite and conquer.
Last year he took a 9.5 percent stake in Gucci with the hope of cooperating with his rival on strategies involving the purchase of raw materials, real estate and advertising. When that didn’t work out, Bertelli sold his stake to LVMH for $140 million and vowed simply “to get on with things.” The sale set the stage for the most dramatic takeover battle the fashion industry has seen in years. Ultimately, French retail conglomerate Pinault Printemps Redoute triumphed and won control of Gucci.
But Berteilli has long had his sights trained on Sander. He was said to have been in talks to buy the house with a view to building Sander’s accessories business, cooperating on strategy, and laying the foundation for a new luxury goods group.
The anticipation of a transaction intensified in recent weeks when reports surfaced that Bertelli may have purchased Sander’s controlling 52 percent stake in her Hamburg company. One Italian report speculated that Bertelli bought the shares for approximately $110 million.
At the time, Sander issued a statement that it was unaware of such a sale. The designer had since been quoted widely in German newspapers downplaying the possibility.
“I am not surprised, though, that rumors like these are going around,” Sander told WWD recently. “It is very much in fashion nowadays to talk about luxury goods groups and the sale of individual companies. It is natural that my company will be talked about.”
Subsequently, sources close to Sander said the firm was talking to Prada about an accessories license. However, the core of Bertelli’s strategy has always been direct control over production and distribution, which is why — like fellow Italian companies Ferragamo and Bulgari — he’s always shunned licenses.
Market sources also indicated that Sander’s interest in boosting her accessories business was a key catalyst for the sale.
Accessories generate less than 3 percent of Jil Sander’s overall sales, and the designer would like to boost that figure to 20 to 30 percent, once source said.
Jil Sander’s handbags are produced under license by the German company Goldpfeil, and the designer is said to be dissatisfied with that agreement. Goldpfeil has recently undergone a series of management upheavals.
Bertelli stands by his strategy of direct distribution, which could foreshadow a larger network of Jil Sander stores. “It’s where the profits come from,” he said recently. Indeed, Prada’s more than 120 stores will generate about three-quarters of the company’s sales in 1999.
At present, there are 26 freestanding Jil Sander stores worldwide. Only seven are company owned: in Hamburg, Milan, Paris, Berlin, Frankfurt, Munich and Dusseldorf. In the U.S., there are four franchised Jil Sander boutiques. Ultimo owns locations in Chicago, San Francisco and Costa Mesa, Calif. Jeffrey Kalinsky owns the Jil Sander store in Atlanta.
Prada’s name has been linked to numerous other fashion houses lately. In his 1998 Gucci stock buy, Bertelli said his idea was to develop cooperative strategies with Gucci ranging from purchases of raw materials to distribution. But Gucci simply wasn’t amenable.
Initially, Bertelli said the proceeds from the sale of his Gucci stake to LVMH would be funnelled back into building Prada into a megabrand. The company’s sales are expected to be close to $1 billion this year. But the market has buzzed nonstop with rumors about Bertelli’s next investment or acquisition.
Reports have also pinpointed Prada as one of several potential suitors for Fendi, although Fendi is not officially for sale.
Bertelli has long expressed that his interest in forming a luxury goods group — or even strategic alliances with other companies — would cut costs; create cooperative distribution, and, in turn, growth for various brands. “There could be a number of agreements between luxury goods houses in Europe: Chanel and Versace, for example, or Giorgio Armani and Jil Sander,” he said in a 1997 interview.
Meanwhile, Sander’s reason for selling the company are simple, according to sources. At a time of intensive consolidation of fashion firms, she wanted to secure the future of her company and her ability to focus on the creative part of the business. Sources close to the designer said Sander had become weary of the financial distractions that go with running a publicly traded company.
For 1998, Jil Sander reported aftertax profit of $3.5 million, down 1.1 percent from 1997, the results dented by a higher corporate tax rate, the firm said. Pretax profit rose 13.8 percent to $6.8 million, but the company added that it was less than its expectations, and cited various reasons, including the Asian financial crisis and a fall in earnings from licensees.
Sales and licensing revenue for Jil Sander in 1998 rose 8.6 percent to $115.8 million. Dollar figures are translated from the German mark at current exchange rates.