Prada Nearing Deal for Versace and Jimmy Choo Just as the Market Plunges
Prada has been inching closer and closer to Versace and Jimmy Choo all year.
The Italian brand was one of the early bidders on the scene after Capri Holdings tapped Barclays to sell the brands, according to sources who have been following the process. In February, Prada surged to the front of the pack and entered into exclusive talks with Capri that went well enough to be extended.
With that period of exclusivity set to end mid-month, the stars seemed to be lining up for a deal that would both build-out Prada’s luxury portfolio and infuse Capri with cash to help turnaround Michael Kors.
Simeon Siegel, an analyst at BMO Capital Markets, saw signs earlier this week that Capri was leaning toward a sale of the brands after the company’s chief financial and chief operating officer Thomas Edwards decided to decamp to Macy’s Inc.
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“Mr. Edwards has been with Capri since [April 17, 2017], just before the company announced its Jimmy Choo acquisition,” Siegel said in a research note. “ A little over a year after Jimmy Choo, in [September 2018], Capri announced its Versace acquisition, potentially suggesting Mr. Edwards initially joined Capri with the intention of buying brands to build the Global Fashion Luxury Group platform, rather than sell them.“ If Capri is now hypothetically shrinking the portfolio, that may not be the prospect he signed up for and could therefore be looking for another opportunity,” he said.
Earlier this week, a source familiar with the sale process said Prada was on its way to signing a deal to buy both Versace and Jimmy Choo for a total of 1.5 billion euros next week.
But as with so much in life, timing is everything.
And Prada’s push to the finish line ran right through U.S. President Donald Trump’s “Liberation Day,” which kicked off his trade war with the world in earnest.
The new tariffs — adding levies of 20 percent on the European Union, 34 percent on China and more — essentially negate the logic behind the global supply chains underpinning the fashion industry.
It’s an open question whether those tariffs stand or are an opening gambit in what would be a series of negotiations to reorder international commerce.
But fashion went into retreat with the rest of the market and Capri was down 23.9 percent to $14.94 in midday trading Thursday. Prada, which trade in Hong Kong, fared better and was down 4.6 percent to 51.50 Hong Kong dollars.
Investors are running in part because they don’t really know what comes next after such and unprecedented run up tariffs.
It’s enough to give any dealmaker pause.
If the deal for Versace and Jimmy Choo does fall through, it could count as one of the first victims of Trump’s trade war — right after just about every investor in the world on Thursday.
