Mayhoola uses Valentino to secure partnership with Kering
By Astrid Wendlandt
Mayhoola for Investments, the secretive holding company controlled by Qatar’s royal family, appears to have given up on its ambition of building a major luxury group alone after striking a partnership with Kering and agreeing to sell it Valentino. Such a deal is a first in the luxury industry wherein a major French group agrees to align its interests with that of a smaller foreign company in exchange for allowing the former to invest in its biggest asset.
The Doha-based company is betting Kering will open doors and help it with issues such as recruiting talents and securing good locations for boutiques. They could also make investments together. The transaction announced on Thursday, overshadowed Kering’s disappointing second-quarter results.
Mayhoola, owner of brands Balmain and Pal Zileri, has always said it wished to continue making more acquisitions. Before the pandemic, it aimed to conduct an initial public offering (IPO) for Valentino. Last year, the information platform MergerMarket reported that it was in early-stage talks to invest in Giorgio Armani. But that deal never happened.
This week, Kering agreed to buy a 30 percent stake in Valentino for €1.7 billion with an option to acquire the balance no later than in 2028. It said Valentino, known for its Haute Couture and red carpet cocktail dresses, was complimentary to its portfolio of brands. The French group has declined to give details on which performance targets Valentino would have to meet as part of the agreement or how the final price for the remaining controlling stake would be calculated.
Kering said that it may settle part of the balance for Valentino in shares. It stressed they would not be new but existing shares purchased on the open market. Analysts said such initiative will help support the group’s stock price, which has underperformed peers such as LVMH, Prada and Hermès.
It is interesting to note that Kering was not able to buy the whole company at once. Mayhoola used Valentino as bait to secure an alliance with Kering. It regards the French group as a respected partner that will boost its own credibility in the fashion and luxury industry. Industry sources say that because it has a very small portfolio of brands, Mayhoola is struggling to secure good locations for boutiques, particularly at luxury malls in Asia. Mayhoola declined to comment.
For years, Mayhoola refused to sell Valentino. Every time interested buyers knocked on the door, it said “no.” However, Mayhoola CEO Rachid Mohamed Rachid has come to understand that there are not that many brands for sale and Mayhoola would be better equipped to grow those it already owns with Kering’s help.
“Time will tell what will come out of this partnership,” one source close to Mayhoola told Miss Tweed on Friday on condition of anonymity. “This deal is in the interest of all parties.” For many years Kering has been under pressure from the investment community to use its cash pile to make a significant acquisition. It has just signed two in a month. Earlier in July, Kering acquired the high-end perfume maker Creed for more than €3 billion. Quite the shopping spree.
The group this week rejected allegations that the perfumer took off in the 1970s and had little to do with a tailoring business dating back to 1760– as it says on its website– a story explained in the self-published bookThe Ghost Perfumer: Creed, Lies and the Scent of the Century.Many “noses” and perfume industry managers know that the arguments presented in the book are valid, as some of them are old enough to have witnessed Creed’s ascent themselves. Yet Kering stuck to the brand’s official version of its story. “The House of Creed has an incredibly rich history dating back to 1760 when it was founded as a tailoring house. The brand has evolved and grown into the success it is today because of its focus on the highest quality ingredients and the creation of some of the world’s most iconic and renowned fragrances,” Kering told Miss Tweed.
BALMAIN
Kering said it was not contemplating buying Mayhoola’s other major fashion and luxury asset Balmain. The French brand is on track to make around €300 million this year, up from around €275 million, industry sources say. In spite of designer Olivier Rousteing’s high-octane fashion shows and theatrics, the business is not enjoying the success of an “it” bag and making leather goods a significant part of its business, they say.
Mayhoola bought Balmain for €460 million in 2016. Some investment bankers said they did not expect it would be put up for sale any time soon. The Qatari company may be hoping that Kering could help it expand that business as well.
Kering is also certainly not keen on buying Mayhoola’s third fashion brand, the tailor Pal Zileri, which has been lossmaking for nearly the whole decade the Qatari firm has owned it. “Zileri is a disaster,” one industry source said, adding that the brand has been closing shops and is now mainly sold through wholesalers.
Mayhoola also experienced disappointment with British leather goods brand Anya Hindmarch, a British label known for its Smiley, Corn Flakes, Sprite and other zany bag designs. After seven years of mopping up tens of millions of pounds in losses, it sold its 75 percent stake in 2019 to the Marandi family, which owns the Soho House chain of private clubs.
In 2015, Mayhoola was in talks to invest in Lanvin but its approach was torpedoed by the company’s Taiwanese shareholder who preferred to sell control to China’s Fosun a few years later, in 2018. Mayhoola had been invited to put money in the company by the late ex-Lanvin designer Alber Elbaz himself.
Some industry observers believe that had Mayhoola been the chosen partner, invested significant sums in Lanvin and hired an experienced team of managers, the brand would not be the sad story it is now under Chinese ownership.
OIL AND GAS
The Qatari royal family has been plowing money into fashion and luxury to reduce its dependence on oil, gas and hospitality. However, its forays into the sector have not always been a success, to say the least. Let’s remember that in 2011, Sheikha Mozah bint Nasser, the glamorous wife of the then-Emir of Qatar, launched a luxury brand called Qela on which French designer Stephane Rolland worked as a consultant.
Despite grand ambitions, the brand never took off and the country’s attempt at building a luxury consortium called Qatar Luxury Group never materialized. The Qatar Luxury Group also sold its controlling stake in the French leather goods maker Le Tanneur to the French company Tolomei in 2017. Since then, Qatar Luxury Group appears to have ceased to exist. There are few traces of it on the Internet.
VALENTINO
Mayhoola may have made a few bad investments in luxury, but these have been more than compensated by the impressive success of Valentino. The Doha firm bought it from private equity firm Permira in 2012 for €858 million. It’s now worth €5.7 billion on paper. Mayhoola has multiplied its investment by 6-7 times – a sizeable profit. Before the deal was agreed, Mayhoola had asked Banca Intesa Sanpaolo and JP Morgan Chase for their opinion regarding the fair valuation of Valentino, two industry sources said.
In a conference call about its half-year results, Kering said that it could pay for the remainder of Valentino in Kering stock and the transaction would not be dilutive. Kering will buy shares in the open market in order to give them to Mayhoola when it decides to complete the acquisition. “The transaction is part of a broader strategic partnership between Kering and Mayhoola, which could lead to Mayhoola becoming a shareholder in Kering,” the two companies said in a statement.
Earlier this week, Valentino announced internal promotions to strengthen its leadership following the departure of the brand’s Chief Brand Officer Alessio Vannetti, ex-Gucci, who decided to pursue new career opportunities. Valentino is led by Jacopo Venturini, who was Gucci’s chief merchandising officer and worked closely with designer Alessandro Michele.
Last year, Valentino made a recurring underlying profit of €350 million on turnover of €1.4 billion. It has 211 directly operated stores.
BIDAYAT
Mayhoola is led by Rachid Mohamed Rachid, who was president of Unilever North Africa and Egypt’s minister of trade, industry and investment for seven years until 2011. On top of his obligations at Mayhoola, Rachid makes investments through his family office Alsara Investment Group. Based in Switzerland, it has over $2 billion in assets under management and focuses primarily on markets in the Middle East, North Africa and Europe. The group has invested in many companies, including Japanese luxury eyewear maker Akoni which works for Valentino and Balmain.
Two years ago, Rachid created Bidayat, a company that invests in young fashion, jewelry and accessories brands from around the Mediterranean Basin, putting in from $500,000 to $10 million. Bidayat is also planning to relaunch the Walter Albini brand with help from ex-Gucci designer Michele, as Miss Tweed reported in May.
Though he did not live long enough for many people to remember him outside of Italy, Albini, is considered one of the founding fathers of Italian ready-to-wear.A brilliant dandy designer who shot to fame in the late 1960s and 1970s, he died of AIDS in 1983, at the age of 42. For fashion insiders, Albini is ripe for a revival – and Michele is a great fit. In recent months, Rachid and his team have been busy interviewing people and building the brand’s teams. Rachid is making a huge bet on this revival and knows that he cannot afford to make a mistake.
You can bet he will call on his new friends at Kering to help him take this project off the ground and ensure its success.