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Private equity fund Permira takes controlling stake in Valentino Fashion Group

Permira private equity fund bought a controlling stake Wednesday in the Valentino Fashion Group, whose luxurious designs have been sought by the elite since Jacqueline Kennedy donned a Valentino white lace minidress for her 1968 wedding to Aristotle Onassis.

The sale marks yet another private equity fund that has stepped into the luxury goods sector, following Change Capital Partnership's purchase of Jil Sander and Apax Partners' acquisition of apparel maker Tommy Hilfiger Corp., both last year.

For Valentino, who set a standard for Italian couture more than a decade ahead of his best-known rivals and before Milan rose to become a fashion capital, the move is the third change of ownership since he and his partner Giancarlo Giammetti sold the brand in 1998.

Permira said it took a 29.6-percent controlling stake in the company in a block trade completed before the opening of the Milan Stock Exchange on Wednesday. It beat a rival bid by U.S.-based Carlyle Group, which was negotiating with Valentino Chairman Antonio Favrin for a nearly 20 percent stake controlled by his holding company Canova Srl, the daily il Sole-24 Ore reported.

The deal values Valentino at 2.6 billion EUR (US$3.52 billion).

Permira said it paid 782.6 million EUR (US$1.06 billion) to buy the stake from an investment vehicle controlled by members of the textile-making Marzotto family, which bought Valentino in 2002. That branch of the family retained a 0.3 percent share.

Other members of the family have stakes of 7.5 percent and 12.4 percent through two different holding companies; the rest is traded on the Milan Stock Exchange. Asked if another deal was in the making, Gaetano Marzotto, one of four brothers who control the 12.4-percent stake through Titus Srl - said the "everything is still open," the news agency ANSA reported.

Permira will pay 35 EUR (US$47.38) per share plus a 0.65 EUR (US$.88) dividend a share - nearly 2 percent above the closing share price Friday. Shares were suspended from trading Monday and Tuesday, pending the announcement.

Permira said in a statement that it is interested in increasing its stake at a price no higher than the one paid Wednesday. Shares in Valentino were trading up 0.2 percent at 35.25 EUR (US$47.85) on Wednesday.

Valentino also has majority control of the German menswear company Hugo Boss AG - which accounted for 78 percent of the group's first-quarter revenues - and licenses the Marlboro Classics and M Missoni brands.

The group reported a 17 percent increase in net income to €48.6 million (US$66 million) in the first quarter on sales of 637.7 million EUR (US$865.6 million) - up 11 percent from a year earlier. While sales of both Hugo Boss and Valentino were up nearly 9 percent, sales of the Valentino brand were up a more modest 2 percent.

The greatest increases were registered in the United States, where sales of group brands were up 18 percent.

Marzotto, a family-run company based in Veneto that has been in the textile business since 1836, helped turn around Valentino after the 2002 purchase. It spun Valentino off into a separate business in 2005, launching IPOs for both the Valentino Fashion Group SpA and Marzotto SpA due to "managerial differences inherent to the textile business and the fashion business."

Valentino, who celebrated his 75th birthday last Friday as rumors of the sale started pushing up VFG stock, is planning to mark 45 years of his career with a lavish celebration in his adopted Rome on July 6-8, including a retrospective and a fashion show.

Born Valentino Garavani north of Milan, the designer trained in Paris before moving to Rome to launch his line, becoming the first Italian to compete with such French names as Dior and Chanel. He made his international debut in 1962 in Florence at the Pitti Palace and his 1967 White Collection made his reputation as a fashion leader.

He has since branched into jeans, perfumes and accessories. Still, Valentino remains one of the most sought-after designers for high-society events and the red carpet. Both Julia Roberts and Cate Blanchett wore Valentino gowns when they won their Oscars.

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