Jose Castro – Fourth Estate Cooperative Contributor
Milan, Italy (4E) – According to two sources familiar with the transaction, VTB Bank’s investment arm VTB Capital has already made a down payment to purchase majority shareholdings over Italian fashion house Roberto Cavalli. The said transaction is set to be completed by the end of November.
The said purchase would be for a 70% shareholding in the Florentina,Italy based company. The said asset is projected to be worth EUR400 million or about USD506.16 million. The cash payment already made was said to be worth EUR20 million, according to anonymous sources.
VTB Capital is headed by Italian banker Riccardo Orcel. He is better known as the brother if UBS head of investment banking Andrea Orcel. VTB’s Orcel was busy raising funds from a consortium of investors in order to finalize the deal. The urgency is due to the possibility of more sanctions be imposed on Russia for its participation in the ongoing violence in the Ukraine.
Despite the flurry of activities, many say the deal is already legally binding. VTB Capital and Cavalli representatives declined to make any comment on the matter.
The reason for the acquisition by VTB Capital is its intent to introduce the fashion house into growth markets such as Russia and the Middle East as well as Asia. There is a possibility that
Despite the no comments, the septuagenarian fashion designer, known for his loud animal prints, had confirmed that part of the business would be sold. He made the remarks during the Milan Fashion Week held last month. Cavalli was quoted as saying, “It’s like selling a small piece of myself. It’s not a very eay thing to do.”
There have been previous forays of selling the majority stake, such as the one it had with private equity firm Permira. The problem then was the inability to reach a final price tag based on a multiple worth 18 times the value of the firm at earnings before interest, tax, depreciation and amortization or EBITDA. The said price was around EUR25 million.
There is a growing appetite in Russia for Italian assets, such as luxury goods, food and fashion while Italy on the other hand is getting out of the doldrums of recession. VTB is seeking to address this demand, as it had purchased a 9% stake in Eidos Partners, the Milanese based M&A advisory firm last January. They would leverage the expertise of Eidos to assist Russian companies sink their teeth into the Italian market.
VTB Capital, with the cash payment is leveraging that the deal would prove successful. It also said it would lose money if it pulled out of the deal. The deal though may not survive if a new set of sanctions are to be imposed or if Italian relations with Moscow sputters.
The deal is also rumored to be backed by an alliance of Russian billionaires, all of whom have set their sights on acquiring more Italian companies. Amongst the recent Russian-Italian deals was the purchase of vodka tycoon Roustam Tariko’s purchase of Italian winemaker Garcia back in 2013. Another deal was the purchase of Octo Telematics last February by the Renova Group, which is owned by Viktor Vekelberg.
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