Michael Kors and Versace merger, company profiles, reson behind aquisition, financial decisions, financial implications of acquisition, about capri holdings ltd., risks and uncertainities, publicities of acquisition

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FINANCE FOR EXECUTIVES
SUBMITTED TO:
Mrs. A.Rajyalakshmi
SUBMITTED BY:
Animesh Verma, Manipriya Tyagi and Vanshika Mathur

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CONTENTS
S.No. Topic
1 Company Profile of Versace
2 Company Profile of Michael Kors
3 About Capri Holdings Limited
4 Reason behind Acquisition
5 Financial Decisions
6 Financial Implications of Acquisition
7 Risks & Uncertainties
8 Publicity of Acquisition
9 References

3.
VERSACE
Founded in 1978 in Milan,Gianni Versace is one of the leading
international fashion design houses and a symbol of Italian luxury
world-wide. It designs, manufactures, distributes and retails
fashion and lifestyle products including haute couture,
prèt-à-porter, accessories, jewellery, watches, eyewear, fragrances,
and home furnishings all bearing the distinctive Medusa logo.
The Versace Group distributes its products through a world-wide
D.O.S network which includes over 200 boutiques in the principal
cities and over 1500 wholesalers worldwide.
Donatella Versace has been Artistic Director of Versace since
1997 and has steered the brand into the 21st century. Today,
Versace represents its heritage through its strong and fearless designs, while addressing a new
global audience which continues to strengthen Versace’s position in contemporary culture.
In 2000 Gianni Versace opened Palazzo Versace, the first hotel project to be branded by a luxury
goods company, which provides tourists and travellers the opportunity to experience and enjoy
the complete Versace lifestyle. The second Palazzo Versace built in Dubai opened in 2015. The
third Palazzo Versace will be built in Macau, China.
In May 2016, the Versace Group appointed Mr. Jonathan Akeroyd to the position of CEO and
member of the company’s Board of Directors.
In September of 2018 Versace announced that one hundred percent of all Blackstone and
Versace family shares had been sold to the Group Michael Kors Limited. In January 2019,
Gianni Versace joined Capri Holdings Limited, forming a new global fashion luxury group
together with ​Michael Kors​ and ​Jimmy Choo.

4.
MICHAEL KORS
Designer Michael Kors was raised in Merrick, Long Island, a
suburban town 23 miles from New York City. His keen eye
for fashion was evident at a young age: at five, he advised his
mother, Joan, to cut the bows off her wedding dress for her
second marriage. She removed the bows. Michael Kors is a
world-renowned, award-winning designer of luxury
accessories and ready-to-wear. His namesake company,
established in 1981, currently produces a range of products
under his signature Michael Kors Collection, MICHAEL
Michael Kors and Michael Kors Mens labels. These products
include accessories, footwear, watches, jewelry, women’s and men’s ready-to-wear, wearable
technology, eyewear and a full line of fragrance products.
Kors graduated from high school in 1977 and attended the Fashion Institute of Technology in
New York City. He also took a job at Lothar’s, a trendsetting boutique on West 57th Street,
where his talents were noticed by Dawn Mello, then executive vice president of Bergdorf
Goodman. Mello encouraged Kors to contact her if he ever designed a collection. Kors did just
that, and in 1981 officially launched his own line. He held his first runway show in 1984,
sending Iman down the runway in a turtleneck and gray flannels.
From 1997 to 2004, as he continued to build his own business, Michael Kors also served as
creative director of Céline, the renowned French luxury brand. The appointment was
notable—few American designers had headed up French brands—and his impact was significant.
Kors is widely credited with restoring the brand’s luster, re-establishing it as a major European
fashion house. During that same period, he launched Michael Kors Mens (2002) and MICHAEL
Michael Kors (2004).
Michael Kors stores are operated, either directly or through licensing partners, in some of the
most prestigious cities in the world, including New York, Beverly Hills, Chicago, London,
Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo, Hong Kong, Shanghai and Rio de Janeiro.
The company prides itself on hiring and retaining diverse talent and providing an inclusive work

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environment for all, while celebrating global events and cultures that reflect the diversity,
experiences and perspectives of people around the world.
Behind this burgeoning empire stands a singular designer with an innate sense of glamour and an
unfailing eye for timeless chic. Michael Kors has won numerous accolades within the fashion
industry, been honored for his philanthropy, and earned the respect and affection of millions.
Wholly dedicated to a vision of style that is as sophisticated as it is indulgent, as iconic as it is
modern, he has created an enduring luxury lifestyle empire with a global reach.

6.
CAPRI HOLDINGS LIMITED
Capri Holdings Limited is a global luxury fashion company made up of iconic brands which are
market pioneers in fashion, style and craftsmanship. The brands span the broad range of luxury
fashion categories, including accessories for women and men, apparel and ready-to-wear,
wearable technology, watches, jewelry, eyewear and a full line of fragrance items. The
company's goal is to continue growing its brands 'global scope while ensuring that they retain
their independence and exclusive DNA.

7.
REASON BEHIND ACQUISITION
Can the United States produce a company to compete with LVMH and Kering?
That question has come up again and again since the early 2000s. The debate began when Coach
purchased Kate Spade for $2.4 billion​, two years after ​buying the shoe brand Stuart Weitzman​,
and then ​changed its name from Coach Inc. to Tapestry Inc.
Tapestry executives had not been shy about their intentions. The new, brand-neutral name, ​they
said​, is intended to “grow with our portfolio and with our current brands as they extend into new
categories and markets.”
Following its ​purchase of the shoe brand Jimmy Choo in 2017​, Michael Kors’s acquisition of
Versace (and its accompanying name change) only amplifies the sense that American fashion
companies are attempting to get on the level of their European counterparts.
The acquisition of Versace will allow the brand to properly compete with Kering’s powerbrand
Gucci, whose sales have been propelling Kering forward since the arrival of Alessandro Michele
in 2015. Donatella Versace’s anniversary collection in 2017 to commemorate the death of her
brother Gianni raised the profile of the Italian brand again, but without the financial force of a
conglomerate behind it, it would be difficult for Versace to reach the same scope as its main
Italian rival.
With the acquisition of Versace, they have now created one of the leading global fashion luxury
groups in the world. A statement, in which Idol explained that the name Capri was inspired by
the Italian island’s glamorous reputation. The Chairman of the group whose brand portfolio
includes Michael Kors and Jimmy Choo, adds “The acquisition of Versace is an important
milestone for their group. Versace was founded in 1978. For over 40 years, Versace has
represented the epitome of Italian fashion luxury, a testament to the brand’s timeless heritage.
They are excited to have Versace as part of their family of luxury brands, and they are committed
to investing in its growth. With the full resources of their group, they believe that Versace will
grow to over $2.0 billion in revenues. they believe that the strength of the Michael Kors and

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Jimmy Choo brands, and the acquisition of Versace, position us to deliver multiple years of
revenue and earnings growth.”
The trick will be for Michael Kors to guide Versace’s growth without trampling its distinctive
creative vision. It’s the rare brand that seems like a true family affair: In 2017, Donatella Versace
earned rave reviews for a vibrant, fierce ​collection​ that paid homage to the work of her brother
Gianni on ​the 20th anniversary of his murder​.
FINANCIAL DECISIONS

9.
Strategic Initiatives-
As part of their strategic plan for the long-term growth of Versace, they intend to execute on the
following key initiatives:
● Grow Versace to US$2.0 billion in revenues globally
● Build on Versace’s luxury runway momentum
● Enhance Versace’s powerful and iconic marketing
● Increase global retail footprint from approximately 200 to 300 stores
● Accelerate e-commerce and omni-channel development
● Expand men’s and women’s accessories and footwear from 35% to 60% of revenues
The acquisition of Versace is expected to deliver a number of ​benefits​ for their Company,
including:
● Opportunity to help grow their group’s revenues to US$8.0 billion in the long-term
● Expand their global luxury group to include three iconic founder-led brands defined by
fashion luxury products with a reputation for world-class design and innovation
● Diversify their geographic portfolio from:
1. 66% Americas to 57% Americas
2. 23% Europe to 24% Europe
3. 11% Asia to 19% Asia
● Potential to create long-term operational synergies
Transaction Details
The transaction is not subject to conditional financing. It is estimated that the cash portion of the
purchase price will be financed by a combination of cash on hand, drawings under the current
revolving credit facility of the company and underwritten bank term loans from their advisors
JPMorgan Chase Bank, N.A. And with Barclays. The Versace family will also earn EUR 150
million in shares of Capri Holdings Limited from the purchase price. The transaction is
scheduled to close in the fourth fiscal quarter of the business, subject to defined closing
conditions, including obtaining requisite regulatory approvals.

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FINANCIAL IMPLICATIONS OF ACQUISITION
They were pleased to deliver a double digit increase in revenue, driven by the addition of
Versace and growth from Jimmy Choo,in the second quarter. Michael Kors revenue was in line
with their expectations and they are extremely pleased to report that the brand returned to
positive comparable store sales during the quarter, led by their successful efforts across product
innovation, brand engagement and customer experience. Second quarter earnings per share they
are below their expectations, reflecting higher expenses due to timing, as well as greater than
anticipated challenges related to the situation in Hong Kong.”
For Fiscal 2020, they remain focused on executing on their strategic growth initiatives and are
reiterating their guidance for revenue of approximately $5.8 billion and adjusted earnings per
share of approximately $4.95. From a longer-term perspective, they are encouraged with the
progress they are making developing their global fashion luxury group. The integration of
Versace is going smoothly, and Jimmy Choo continues to advance its strategic initiatives.
Additionally, the Michael Kors brand repositioning efforts are resonating with customers. With
continued focus on execution and investment to support their growth plans, they are confident
that Capri Holdings remains on track to grow revenue to $8 billion dollars over time and deliver
multiple years of earnings growth."
Overview of Capri Holdings Second Quarter Fiscal 2020 Results:
● Total revenue of $1.442 billion increased 15.1% compared to last year. On a constant
currency basis, total revenue increased 16.1%.
● Gross profit was $874 million and gross margin was 60.6%, compared to $763 million
and 60.9% in the prior year. Adjusted gross profit was $879 million and adjusted gross
margin was 61.0%, compared to $765 million and 61.1% in the prior year.
● Income from operations was $75 million and operating margin was 5.2% compared to
$190 million and 15.2% in the prior year. Adjusted income from operations was $202
million and operating margin was 14.0%, compared to $218 million and 17.4% in the
prior year.

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● Net income was $73 million, or $0.47 per diluted share compared to $138 million, or
$0.91 per diluted share in the prior year. Adjusted net income was $177 million, or $1.16
per diluted share, compared to $192 million or $1.27 per diluted share in the prior year.
● Net inventory at September 28, 2019 was $1.073 billion, a 39.7% increase compared to
the prior year, primarily reflecting incremental Versace inventory.
Full Year Fiscal 2020 Outlook
For Capri Holdings, the Company expects the following.
● Total revenue of approximately $5.8 billion
● Operating margin of approximately 15.0%
● Interest expense in a range of $15 million to $25 million
● Weighted average diluted shares outstanding of approximately 153 million
● Effective tax rate of approximately 11%
● Diluted earnings per share of approximately $4.95, including approximately $0.20 per
share of dilution from Versace.

12.
RISKS & UNCERTAINTIES
Michael Kors' entrance into the world of luxury with a lack of industry experience comes as a
risky move, particularly as some have challenged the $2.12 billion valuation far too high for a
business that has continuously struggled to increase revenue and often run losses. Revenue of
less than $1 billion a year, Versace is well behind rivals controlled by conglomerates including
Louis Vuitton, Gucci and Saint Laurent.
In addition, the primary concern concerns Kors' overarching vision for Versace, and investors
fear a recurrence of extreme discounting as a way of selling their goods in the American
conglomerate. Moreover, the way the iconic brand developed its identity through extravagance,
bright colors, and boldness contrasts with the predictability of the simple merchandise of
Michael Kors, and this has raised doubts as to whether family-run brands focused on a specific
creative vision will retain their core value when operated by conglomerates hungry for profit and
recognition.The comparison between Italian heritage, history and craftsmanship against a brand
that has historically made money in malls is blaring, but they complement each other in terms of
strengths and weaknesses, with the two brands existing at opposite ends of the luxury spectrum.
With fashion writers dubbing 2017 as "the year of Versace," it remains to be seen if, despite the
rapid change in fashion trends, Capri will sustain its momentum. Historically, Versace struggles
when it comes to adjusting to fashion trends compared with rivals, with 2017 becoming the first
successful year following 3 straight years of failure. Although Versace's reluctance to be sold to
the French company LVMH is possibly due to their political conflicts, the purchase on the part
of Michael Kors would be purely one in search of luxury diversification rather than moulding
Versace into its own aesthetic.

13.
PUBLICITY OF ACQUISITION
This was the topic of discussion in the year 2018 as from
Forbes to Vogue​, this acquisition of Michael Kors made
everyone stunned how these renowned brands of their own
identity joined their hands to serve the people under the one
company, Capri Holdings Ltd. Kors, in a statement, said it
was committed to investing in Versace’s growth, with a goal
to increase its annual revenue from $850 million currently to
over $2 billion over the next few years, as well as expand its
retail network from 200 to 300 stores.
“The brand is one of the best known in the world, with huge
reach and enormous growth potential, particularly in
accessories and in men’s wear,” Mr. Idol said. “The addition
of Versace into the fold is their latest step in creating one of the world’s leading fashion and
luxury groups.”
The deal is the latest consolidation in the fashion industry, as traditional players have scooped up
smaller brands. This year alone Ermenegildo Zegna bought control of Thom Browne, while Puig
acquired majority control of Dries Van Noten.
Watch the show organised by Capri Holdings on acquisition of versace
https://youtu.be/z4wzfjHnXCU

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REFERENCES
● Retrieved from:
https://www.vox.com/the-goods/2018/9/25/17896082/michael-kors-versace-acquisition
● Retrieved from:
https://www.sec.gov/Archives/edgar/data/1530721/000119312518362322/d653406dex99
1.htm
● Retrieved from:
https://www.businesswire.com/news/home/20191106005324/en/
● Retrieved from:
https://www.mergersight.com/post/michael-kors-2-12bn-acquisition-of-versace
● Retrieved from:
https://www.versace.com/international/en/about-us/company-profile.html
● Retrieved from:
https://www.michaelkors.global/en_IN/info/about-us/eus580019