France’s LVMH Moet Hennessy Louis Vuitton SA will buy famed U.S. fashion house Donna Karan International Inc. for $243 million, adding another familiar brand name to LVMH’s stable of luxury products.
LVMH will pay $10.75 per share to acquire Donna Karan, LVMH said in a statement. The price is 26% higher than the $8.50 per share price initially proposed by LVMH in December.
Donna Karan will remain artistic director and retain control over creative aspects of the firm, she said in an announcement Monday, the Associated Press (AP) reported. She founded the firm in 1984, and it became one of the best-known names in international fashion.
Karan and her husband, Stephen Weiss, had already agreed to sell Gabrielle Studios Inc., a private company that owns the Donna Karan brand names to LVMH for between $400 million and $450 million. On Monday, the price was set at $400 million to reflect the higher price being paid for Donna Karan.
Donna Karan designs and makes clothing under the Donna Karan New York and DKNY brands, and has 95 shops across the United States. Revenues last year were projected at $625 million.
LVMH’s portfolio of labels include Christian LaCroix, Emilio Pucci, Fendi, Givenchy and Marc Jacobs. Its other products include Dom Perignon champagne, Hennessy cognac, Christian Dior perfume and TAG Heuer watches.
“We look forward to closing the transaction and to moving forward with Ms. Karan and her team to help expand both the product line and geographic reach of this globally successful lifestyle brand,” said Yves Carcelle, president of LVMH’s fashion Group in a statement.
LVMH’s purchase of Donna Karan is its largest investment in the U.S. fashion industry to date.
“I have always admired LVMH and the environment it has created for designers in supporting their creativity, emphasizing their individuality, respecting their brands and providing the resources to develop global luxury businesses,” the AP reported Karan saying.
The merger is expected to close in the third quarter, pending approval by shareholders and government regulators, the AP reported. Shareholders representing approximately 42% of the outstanding Donna Karan shares, including Karan and Weiss, have already agreed to vote in favor of the merger.
Analysts told AP the move would help broaden global distribution of Karan’s lines, which have experienced flat growth in North America, and give the label more cachet.
In 1999 and 2000, Donna Karan trimmed its work force and closed some unprofitable stores.
Donna Karan went public in 1997, but its shares fell from an opening price of $24 to around $5 before the proposed purchase was announced last December.
Shares in Donna Karan were up $1.43, or nearly 16%, to close at $10.41 in trading Monday on the New York Stock Exchange.
LVMH shares were down 13 cents to close at $9.94 Monday on the Nasdaq Stock Market.
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