After selling off DKNY to G-III Apparel earlier this year, LVMH Moët Hennessy Louis Vuitton has reported a 5.4 percent passive stake in the group. For the uninitiated, a passive stake – as distinct from an active stake – is a form of investing where the shareholder – LVMH in this case – takes no active part in running the company. It is worth noting that according to the December 12 Securities and Exchange Commission filing, which reflects the December 1 acquisition, LVMH does have a shared voting power.
G-III Apparel Group, which also owns licenses for Calvin Klein, Ivanka Trump, and other brands, sold $75 million in common stock to the luxury conglomerate chaired by Bernard Arnault in connection with the DKNY deal. Sofidiv, LVMH SE, Financière Jean Goujon, Christian Dior, Semyrhamis, Financière Agache, Montaigne Finance and Groupe Arnault are also listed as reporting persons in the filing.
In July, LVMH agreed to sell Donna Karan International to G-III Apparel Group Ltd. for an enterprise value of $650 million, a rare disposal for the French luxury-goods maker, which failed to turn around a label that once defined workplace attire for successful U.S. women.
G-III funded the total purchase price of $650 million for DKNY, subject to certain adjustments, with a combination of cash, $75 million of newly issued shares of its common stock to LVMH, and a $125 million junior lien seller note, of which $75 million in principal amount has a six and a half year maturity and $50 million in principal amount has a seven year maturity. The cash portion of the purchase price was paid from the proceeds of a $350 million six-year senior secured term loan, and the balance from borrowings under a $650 million five-year senior secured asset based revolving credit facility and cash on hand.
At the time, the sale, in which G-III gained the Donna Karan and DKNY brands, was said to reflect LVMH’s inability to generate profitable growth from the business. The transaction makes it likely that LVMH announces plans to buy back 1 billion euros ($1.1 billion) of stock.
LVMH shelved the Donna Karan line after its founder departed last year, with plans to focus on the DKNY brand, the New York Post reported on July 20. It also said that the company had decided to sell both brands after seven months of “disappointing performance” under new designers Maxwell Osborne and Dao-Yi Chow.
As for G-III, the New York-based company aims to double revenue to $5 billion. In the past five years, it has increased its revenue by over $1 billion. In 2005, the Calvin Klein business produced $35 million in sales. G-III expects Klein to hit $1 billion in fiscal 2017 (ending January 31st, 2017). In 2016, DKNY sales are projected to reach just $300 million.