French family-controlled luxury giant LVMH will sell its Donna Karan brand to American family business G-III Apparel Group in a $650 million deal by the start of 2017.
LVMH, which owns flagship fashion label Louis Vuitton, champagne house Moët & Chandon and cognac label Hennessy, bought Donna Karan in 2002 for about $243 million and was its first venture into the ready-to-wear market.
The agreement announced this week will be first divestiture of a major brand by LVMH since it sold Christian Lacroix to the Falic Group in 2005.
LVMH spent an estimated €116 million ($127 million) in efforts to reposition and invest in Donna Karan, the Wall Street Journal reported.
However, Toni Belloni, group managing director of LVMH, said, “We believe the DKNY brand has a dynamic position in the market, and when G-III approached us about acquiring the brand, we concluded that the time was right and that G-III was the right steward going forward.”
Morris Goldfarb, chairman, chief executive and president of G-III, said of Donna Karan, “ We are excited to build upon its strong foundation as we seek to capitalise on a significant market opportunity.
“Donna Karan brings increased scale and diversification, while providing incremental growth on top of our portfolio of some of the best fashion brands in the world.”
LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group of more than 70 brands, reported revenue of €17.2 billion ($18.9 billion) in the first half of 2016, an increase of 3%. Organic revenue growth was 4% compared to the same period in 2015.
Billionaire chairman and chief executive Bernard Arnault owns a controlling share in LVMH. Family members Antoine Arnault and Delphine Arnault sit on the board of directors.
Polish Holocaust survivor Aron Goldfarb migrated to the United States and established his own outerwear company in New York in 1956. Son Morris diversified and propelled what became G-III Apparel Group from 1972.
The Donna Karan deal follows the purchases by G-III of competitors Marvin Richards and Winlit in 2005, Jessica Howard and Eliza J in 2007 and Andrew Marc in 2008, Vilebrequin in 2012 and GH Bass in 2013.
Today, Morris beneficially owned approximately 9.6% of common stock as of 1 March 2016. Son Jeffrey Goldfarb serves as director of strategic planning.
G-III sales grew by 10.7% to $2.34 billion and net income increased by 3.6% to $114.3 million, both a record, for the fiscal year ending 31 January 2016.
However, the market reacted negatively to the announcement of the Donna Karan acquisition. G-III shares were worth $50.16 on 22 July but plummeted 20% to $39.58 per share on 27 July.