LVMH to sell Donna Karan to G-III in $650m deal

French luxury goods company LVMH Moet Hennessy Louis Vuitton said on Monday that it has agreed to sell Donna Karan International to US-based G-III Apparel Group in a $650m deal.

The transaction is expected to close late this year or early 2017.

Morris Goldfarb, chairman, chief executive officer and president of G-III, said: “Donna Karan International is an iconic global fashion company. Its lifestyle aesthetic resonates well with consumers throughout the world. We are excited to build upon its strong foundation as we seek to capitalize on a significant market opportunity.

“Donna Karan brings increased scale and diversification, while providing incremental growth on top of our portfolio of some of the best fashion brands in the world. We believe we are well positioned to create and sustain additional value for our shareholders, partners, and customers.”

Meanwhile, LVMH said the time was right to sell Donna Karan and that G-III has “the expertise and capabilities to broaden the brand’s distribution and take it to its next level of success”.

G-III will fund the deal through new indebtedness, $75m of newly issued G-III common stock to LVMH, and a $75m six-and-a-half year seller note.

Societe Generale said the price was attractive compared to the expected sales at around 2x, given the current EBIT losses, but reflective of a brand well known in the very large US market and which could be rapidly expanded.

“LVMH has been unable to develop the brand, which has been underperforming for years from a revenue perspective (slow – no growth) and an EBIT perspective (high single-digit only EBIT margin until last year’s losses),” the bank said.

“Given the group’s low indebtedness…this deal raises the likelihood of an exceptional shareholder return announcement in the near future in our view, while the group has been quiet for a while on the acquisition front (a structural market concern on the stock).”

At 1135 BST, LVMH shares were up 1% to €143.75.