MILAN/LONDON London-based private equity fund Permira is in exclusive talks with the Qatari royal family over the sale of Italian fashion house Valentino and a decision is expected by the end of the month, four sources close to the talks said on Monday.
The Qataris, who also own London's Harrods department store, have been one of the world's most active investors with assets ranging from stakes in German sports car maker Porsche (PSHG_p.DE) to shares in British bank Barclays (BARC.L).
In March, Qatar Holding bought a 1.03 percent stake in luxury conglomerate LVMH.
A sale of the entire Permira stake in Valentino would however be the first acquisition of a top fashion house by the Qatari family, where the wife of the Emir, Sheikha Mozah, is known for loving Valentino dresses.
In a statement on Monday, Valentino confirmed it was in talks with a potential buyer but did not disclose its identity.
"As previously stated, Valentino has seen increasing interest from a number of potential buyers," Valentino's Chief Executive Stefano Sassi said in an emailed statement on Monday.
"In this context, an exclusivity has been granted to one of the potential buyers, who expressed interest in the long term potential of the brand, and it is expected to expire in July," he said. Valentino said no deal had yet been reached.
One of the sources close to the negotiations said the owners intended to delay the sale of Valentino for a year but the offer from the Qataris persuaded them to move up the timeline.
Another source said an agreement was likely but the deal was not yet done. Valentino said no sale had been agreed.
Perella Weinberg is advising the parties on the deal, a Dubai-based source said.
Speculations over a sale of Valentino, known for its flowing red chiffon dresses, have circulated for years.
Given the luxury sector's resilience to financial crises, fashion brands with strong appeal have often attracted cash-rich investors looking for worldwide recognition and financial reward.
In December 2010, high-end menswear retailer Trinity Ltd (0891.HK) bought Italian menswear brand Cerruti for $70 million. In 2011, Dubai retailer Paris Group bought distressed fashion house Gianfranco Ferre.
Details about the negotiations have not been disclosed and it is not clear at this stage with which vehicle the Qatari family would eventually proceed with an acquisition.
Permira took control of Valentino Fashion Group (VFG), which at the time included Valentino and German menswear brand Hugo Boss BOSS_n.DE, at a market peak in 2007 for 5.3 billion euros ($6.5 billion) in one of the largest deals in Europe that year.
In December 2009, hit by the financial crisis, VFG had to restructure its debt and Permira, together with Italy's Marzotto family, placed Hugo Boss in a separate entity.
Hugo Boss has a market capitalization of 5.4 billion euros.
Permira and the Marzottos also injected 250 million euros of cash to cut the debts of VFG, reducing the overall burden by one third to about 1.5 billion euros.
Permira currently owns a controlling stake in Hugo Boss and fully owns VFG. The Marzottos, a leading textile family in Italy, have exited the Valentino business but still own an indirect minority stake in Hugo Boss.
Following the departure of Garavani in 2008, the company has regained the favor of fashion critics after designers Pier Paolo Piccioli and Maria Grazia Chiuri infused fresh life into the brand by opening it to new markets and younger clients.
In 2011, Valentino reported revenues of 322.4 million euros, driven by targeting new customers in Asia and the United States, and partly from selling accessories, such as shoes and perfumes, which are more affordable than the high-end gowns worn by Hollywood stars on the red carpet.
Earnings before interest, tax, depreciation and amortization rose 300 percent in 2011 to 22.2 million euros, and are on track to grow significantly again in 2012, a person familiar with the situation said.
British media reported the deal could be valued at around 550 million pounds.
Besides owning the Valentino lines, VFG makes clothes under license for sporty lines MCS Marlboro Classics and M Missoni. The group also owns a minority stake in the U.S. brand Proenza Schouler.
One of the sources said M Missoni, a line of the larger family-run Missoni company, was part of the negotiations. Permira intends instead to keep control of Hugo Boss.
In March, Qatar's sovereign wealth fund announced plans to take the Harrods brand global to cities such as Paris and New York.
Qatar Holding bought the famous London department store in 2010 from Egyptian-born businessman Mohamed al-Fayed in a deal reported to be worth around 1.5 billion pounds.
($1 = 0.8126 euros)
(This story corrects figure in 23rd paragraph to say million not billion)
(Reporting by Antonella Ciancio and Massimo Gaia in Milan; Simon Meads, Doherty Regan in London; Nina Sovich in Paris, Dinesh Nair, Amran Abocar in Dubai; Editing by David Cowell)