Mariella Burani Fashion Group, which owns Baldinini and other fashion brands, has attracted several equity funds which have presented expressions of interest but no binding takeover offer. Burani Designer Holding, the group’s parent company, has reportedly been in talks for a month with Doughty Hanson to sell MBFG at €26 euro per share. The takeover bid would be extended to Antichi Pellettieri, the company specializing in leathergoods controlled at 53 percent by MBFG.
The overall cost of the operation for the private equity fund would be about €800 million. Half of the transaction would be financed in debt and the rest in equity, according to the daily Il Sole 24 Ore.
Private equity funds have been active lately in taking over luxury companies, the most conspicuous operation in Italy being the purchase this year of Valentino Fashion Group by Permira. However, the current credit crunch affecting financial markets, following the collapse of the U.S. sub-prime mortgage market, could be an obstacle to finance leveraged buyouts.
Baldinini was the main growth driver for the 9-month results of MBFG’s leather division. Group revenues rose by only 1.4 percent to €546.4 million, boosted by some one-off gains, with the leather division representing about 46 percent of the total. Ordinary sales and profits were up by double digits.
The sales results were depressed by exceptional items such as the disposal of knitwear operations and of a multi-brand retailing unit. These items offset the effect of MBFG’s purchase of certain fashion jewellery operations and of Dadorosa, which holds the worldwide license for the production and distribution of Gherardini handbags and accessories.
Excluding exceptional items, sales were up by 10.5 percent at €499.5 million. Among its core businesses, adjusted apparel revenues fell by 8.7 percent to €213.0 million, whereas the leather division rose by 17.9 percent to €229.7 million.
Revenues from MBFG’s own brands rose by 7.2 percent to €408.7 million and licensed brands rose by 37.1 percent to €57.7 million. The remaining revenues consisted of royalties of €4.4 million and of €28.6 million the digital fashion division.
The sales of directly-operated stores fell by 22.3 percent to €97.5 million, franchising rose by 10.4 percent to €39.3 million and sales to wholesale clients reached directly from the group’s showrooms – or direct clients – rose by 32.7 percent to €171.8 million. Sales generated by importers and distributors rose by 12.8 percent to €133.7 million and other indirect wholesale revenues jumped by 68.5 percent to €24.1 million.
Sales in Italy increased by19.8 percent to €164.9 million. Sales into foreign markets rose by 5.5 percent to €301.5 million.
Group profit before amortization and depreciation (EBITDA) dropped by 19.8 percent to €86.1 million and operating profit before interest and tax (EBIT) declined by 24.7 percent to €67.7 million. But after trimming one-off items, EBITDA was up by 17.0 percent to €71.1 million and EBIT increased by 21.4 percent to €52.7 million.
The reclassified EBITDA for apparel rose by 3.4 percent to €27.6 million, representing an EBITDA margin of 13.0 percent against 11.4 percent a year earlier. The EBITDA for leather products rose by 16.5 percent to €38.1 million, but as a percentage of sales it slipped to 16.6 percent from 16.8 percent.
Pre-tax profits were nearly halved to €47.3 million from €73.1 million, but rose by 21.3 percent after deducting exceptional items.
At the end of September, the group had 230 single-brand stores, of which 10 were opened in the third quarter. Baldinini opened one DOS in Italy and four franchises in the quarter – one in China, one in Dubai and two in Russia. At the end of the period, Baldinini had a network of 18 mono-brand stores in Italy, 27 in Russia and in the Baltic countries, five in the Far East and Japan, 14 in Eastern Europe, two in the rest of Europe and four in the Middle East and the rest of the world.
Based on current sales and order patterns, MBFG’s management expects underlying results to grow for all of 2007 and in 2008. MFBG’s product strategy focuses on handbags, accessories and fashion jewellery, while priority markets for expansion are emerging luxury markets.
The group intends to strengthen the apparel division and increase brand awareness as well as increasing the importance of licenses and pushing for further brand extensions.