Prada Acquires Versace for $1.375 Billion, Revitalizing Italian Luxury

Prada has acquired Versace, reigniting hopes of creating a leading "Made in Italy" luxury brand. This move comes as many other family-owned brands have fallen into the hands of French, Swiss, or American companies, while several Italian groups have outperformed the struggling industry.

The $1.375 billion deal brings one of Italy's most renowned fashion brands back under Italian control. In 2018, the brand, along with its debts, was sold for $2.15 billion to Capri Holdings, then known as Michael Kors, which is listed in New York.

Prada, headquartered in Milan and listed in Hong Kong, is controlled by designer Miuccia Prada and her husband Patrizio Bertelli. With a market capitalization of approximately 14 billion euros ($15 billion), it is Italy's largest luxury fashion group by revenue. However, compared to companies like LVMH, which owns Louis Vuitton, Prada has a relatively smaller market valuation despite its fast-growing brand Miu Miu.

Under the leadership of Andrea Guerra, who became Prada's CEO in 2023 to facilitate generational transition, the acquisition of Versace was completed. Lorenzo Bertelli, the son of the company's main shareholders and the chief marketing officer, is seen as the heir apparent.

Achim Berg, a consultant in the fashion and luxury goods industry, stated, "Prada's ambition to become the leading Italian luxury brand group in a market dominated by French groups is a significant move. This is exactly what many Italians have been hoping for."

Despite the combined revenue of Italy's five largest listed luxury brand groups—Prada, Moncler, Ermenegildo Zegna, Brunello Cucinelli, and Ferragamo—still falling short of Kering's approximately 17 billion euros in revenue, even after Kering's significant drop in sales last year, the acquisition marks a bold step for Prada.

Brunello Cucinelli, the founder of the company, summed up the difference in business philosophy between the enterprises on either side of the Alps with his characteristic vivacity. In October, he said at the 2024 Milan Global Fashion Summit, "Our French colleagues are great financiers." He added, "But we Italians treat our 'small but fine' companies as our children, so we want to take care of them and pass them on to the next generation."

While LVMH and Kering have acquired numerous Italian brands, even the larger Italian groups have been relatively cautious in making large-scale acquisitions. Berg noted, "This acquisition signals Prada's serious attempt to build a group, and compared to their past acquisitions of Helmut Lang and Jil Sander, this time the ambition is much greater."

Patrizio Bertelli, the chairman and co-owner of Prada, defined the acquisitions of the two brands as "strategic mistakes." These brands were acquired at the turn of the century and sold a few years later. Since then, the group has primarily focused on organic growth, except for acquiring suppliers.

Both Prada and Versace originated in Milan and still have their headquarters there, with a distance of only 4 kilometers (2.5 miles) between them. Moncler, another Milan-based brand specializing in mountain equipment, was acquired and revitalized by Italian entrepreneur Remo Ruffini in 2003. The brand has also shown some acquisition intentions, purchasing the Italian streetwear brand Stone Island for 1.15 billion euros at the end of 2020.

Moncler's net cash position of 1.3 billion euros has sparked speculation among analysts about further acquisition deals, but the group has denied these rumors. Jil Sander is now part of the OTB group owned by Italian entrepreneur Renzo Rosso, which also includes brands like Diesel and Maison Margiela. However, the group's annual sales of 1.7 billion euros are still relatively small.

Meanwhile, large Paris-based groups continue to expand into the Italian market, highlighting the challenges Prada will face in competing with them after expanding its scale. In recent transactions, Kering acquired a 30% stake in the Italian brand Valentino in 2023, while LVMH helped Tod's achieve privatization and acquired a 10% stake in Moncler's largest shareholder.

In the long run, the focus is on companies like Armani and Dolce & Gabbana, headquartered in Milan, which are among the few Italian companies still fully owned by families and not listed. Their ultimate fate may be decisive in the effort to create a true Italian giant that occupies an important position in the global fashion industry.