The French luxury goods group Kering's deal to acquire a 30% stake in the Italian high fashion group Valentino opens a much larger door for luxury goods for the Qatari ruling family, which is considering further joint investments with the French group to expand their alliance. Kering announced on Thursday that it is purchasing this stake for €1.7 billion ($1.87 billion) in cash from MEHULA Investment, the investment vehicle backed by the Qatari ruling family, with the potential to purchase the remaining shares by 2028. This deal, following Kering's acquisition of the high-end fragrance company Creed, highlights the resurgence of large merger and acquisition activity in the sector as luxury goods companies seek to diversify their revenue sources amid economic turmoil and sluggish demand. It also paves the way for the Qatari ruling family to play a prominent role in the €400 billion luxury goods market, traditionally dominated by family-owned European firms.
Kering stated late Thursday that the investment in Valentino is part of a broader strategic partnership between Kering and MEHULA, which may lead to MEHULA becoming a shareholder in the French group. A source familiar with the deal said on Friday that MEHULA aims to acquire a share in the luxury goods giant by initially purchasing shares in the market. The source added that MEHULA could increase its stake over the next five years by selling the remaining 70% of Valentino to Kering in exchange for a mix of liquidity and Kering shares. MEHULA bought the high fashion house in Rome in 2012 from the private equity fund Permira for about €700 million.
François-Henri Pinault, the head of Kering, stated on Thursday that Kering and MEHULA will explore other potential joint investments to strengthen their partnership. The French group is striving to increase its size and reduce its reliance on the famous Gucci brand, which has lost momentum in recent years and struggled to keep up with the post-pandemic rebound of competitors like Louis Vuitton, owned by LVMH, Europe's largest luxury goods company. The source noted, "This is a deal that gives MEHULA the opportunity to continue playing a major role in the sector, but as part of a much larger entity." The source added that the two have some time to assess how well they align.
The market capitalization of Kering stands at €67 billion. The €1.7 billion price it is paying for a 30% stake in Valentino translates to a project valuation of about 19 times the Italian company's core earnings for 2022, according to analysts from Exane BNP Paribas. The informed source stated that the deal between Kering and MEHULA was agreed upon in less than three months after the leaders of the two groups began discussions in May. MEHULA's strategy focuses on global investments in the luxury industry through a long-term investment approach. The Qatari company also oversees the French luxury house Balmain, the small Italian brand Pal Zileri, and the Turkish luxury goods retailer Beymen.
