For only the second time in its almost 30-year history, LVMH Moët Hennessy Louis Vuitton, the largest luxury conglomerate in the world, is selling a fashion brand.
On Monday, the French company said that it had agreed to sell Donna Karan International to G-III Apparel Group, the American manufacturing and licensing company that owns Andrew Marc, Vilebrequin and Bass and holds the licenses for Ivanka Trump, Calvin Klein and Tommy Hilfiger, among others. It said that the transaction had an enterprise value, a figure based on its stock market valuation plus the net debt on its books, of $650 million.
The last fashion brand that LVMH sold was Christian Lacroix in 2005.
In a statement, Antonio Belloni, LVMH group managing director, said that G-III “has the expertise and capabilities to broaden the brand’s distribution and take it to its next level of success.” Mr. Belloni said that the French company had not been looking to sell Donna Karan until it was contacted by G-III.
Pierre-Yves Roussel, the chairman and chief executive of LVMH Fashion Group (which includes Donna Karan), said in a telephone interview from Paris that, although the company had received several other expressions of interest after the news of a potential disposal leaked last week, no other buyers were considered.
“We wanted to sell to a strategic partner, not a private equity firm or other financial investor,” he said. “G-III are super-passionate about the brand.”
Still, the sale will most likely be regarded as a rare admission of failure on the part of LVMH, which is known for supporting its brands, from Céline to Givenchy, until they find that alchemy of designer and chief executive that transforms a fashion line into a runaway success.
Plans for the sale come just over a year after Donna Karan retired from the house that bears her name and LVMH announced a new strategy for the company. It suspended the high-end line, Donna Karan, to focus on the brand’s lower-priced contemporary collection, DKNY, which has been designed by Maxwell Osborne and Dao-Yi Chow, the duo behind the hip street wear line Public School, since April 2015.
Mr. Roussel acknowledged that the DKNY model, which is dependent on wholesale and ready-to-wear and which he called a “diffusion” business, was “not what we know.”
“It’s a different animal,” he added.
LVMH favors vertically integrated brands with a luxury core.
At the time of the designers’ appointment, Mr. Roussel said that DKNY was responsible for 80 percent of Donna Karan International sales and that with the new team, “we think it can be huge.”
Apparently not under LVMH.
The change in ownership would be the latest saga in the history of the Donna Karan brand, a fashion house that has occupied a special place in the heart of the American working woman since it was introduced in 1984 with the “seven easy pieces” — all anyone would need to build a professional wardrobe.
The brand went public in 1996, and LVMH bought it in 2001 for $643 million as part of a drive into the American market. But the French company struggled with it over the years, and good will among American consumers did not translate into big sales.
The relationship between LVMH and the brand’s founder showed strains. Ms. Karan, before her retirement, said in a New York Times profile, “Vuitton has given me the cold shoulder.”
Shares in LVMH rose about 1 percent after the announcement.
In an April results announcement, LVMH said that Donna Karan and Marc Jacobs — Jacobs is now LVMH’s sole United States fashion property — continued “to work on the evolution of their product lines.”
Luca Solca, head of global luxury goods at the investment research firm Exane BNP Paribas, said, “Selling DKNY is one way to get rid of a problem at a time when the market is tough and luxury companies would be right to show less leniency with underperforming businesses.”
Mr. Solca added, “Getting rid of loss-making businesses is second best to turning them around, but better than keeping them in the group as a perpetual drag.”
Thomas Chauvet, a luxury-goods analyst at Citi, added in an email to investors that the deal could open the door to further sales by LVMH. Mr. Chauvet pointed to the luxury brand Marc Jacobs and the duty-free business Miami Cruise as potential disposals. He said that Miami Cruise was unlikely to renew its concession at DFS Hong Kong airport at the end of 2017.
Mr. Roussel denied any plans to dispose of Marc Jacobs, saying LVMH was “fully committed” to the brand. “It is an entirely different model” from DKNY, he said. “Much more elevated in price, accessories-driven with shoes and bags, and with almost no off-price outlets and controlled distribution.”
No longer involved in the company that bears her name, Ms. Karan is concentrating on her Urban Zen line of products that focus on wellness and promote the work of artisans around the world.
Mr. Osborne and Mr. Chow, as well as Caroline Brown, chief executive of Donna Karan International, will remain with the brand through the transition, according to an LVMH spokeswoman, and announcements about the brand’s future leadership will be made in due course.
Barclays was G-III’s financial adviser on the transaction, and Norton Rose Fulbright U.S. and Simpson Thacher and Bartlett were its legal advisers. Barack Ferrazzano Kirschbaum and Nagelberg was the legal adviser to LVMH.
Credit: NewYork Times