Versace Valuation May Be as Over the Top as Its Clothes

DECEMBER 3, 2013, 2:09 PM

Versace Valuation May Be as Over the Top as Its Clothes


Versace’s valuation looks as aggressive as its outfits. The Italian fashion house, which is sizing up buyout firms and sovereign wealth funds to finance a capital increase, believes it is worth more than 1 billion euros, or $1.36 billion, and could triple in value in three years. There is real potential, because Versace has fallen behind industry trends. But a big price tag for a skimpy minority stake next to a powerful family? That’s hard to pull off.It has been a nasty few years for the influential label. After its founder, Gianni Versace, was shot dead in 1997, control passed to his niece Allegra, sister Donatella and brother, Santo. Some years later, the business found itself unprepared for the financial crisis, and was forced to jettison ill-fitting business lines and stores. How galling to be eclipsed by Prada, a house as restrained as Versace is over the top — until you consider Prada’s $25 billion market capitalization.

Still, the route ahead is clear. The chief executive, Gian Giacomo Ferraris, the well-regarded former Jil Sander chief executive who joined in 2009, has presided over a revival from a low base. Outside cash will help the group copy its rivals’ moves — opening more directly owned stores, bringing licensed products in house and raising Versace’s profile in China.

But the deal structure may not suit everyone. Suppose an investor injects €150 million of new money, and buys €50 million worth of stock from Santo Versace — the only current shareholder who will sell part of his holding — all for a 20 percent stake. People familiar with the matter say earnings before interest, taxes, depreciation and amortization, or Ebitda, at €46 million in 2012, is likely to be nearer €70 million this year. So a €1 billion valuation would amount to roughly 14 times current-year Ebitda. That’s a high multiple for a business in transition — especially if you’re buying a minority stake alongside headstrong creative types.

That may not please many investors. No wonder the latest reports suggest that the Italian state and Qatari money managers, working together, are more likely buyers than classic private equity funds. Yet if everything goes to plan, three times money in three years is a 44 percent annual return. That would look pretty fabulous.

Quentin Webb is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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