Building better businesses - Permira

Investment
overview
Red & Black Lux is the indirect owner of a controlling
stake in the publicly listed German company Hugo Boss
and 100% of the Italian businesses Valentino Fashion
Group (‘VFG’), including Valentino and its licences
division Marlboro Classics and M Missoni (together the
‘three business units’). They operate in the fashion and
luxury goods market, with a presence in more than 100
countries, with over 1,600 single-brand boutiques and
over 430 directly managed shops.
For all three business units 2009 has been
a difficult year, as the global economic
downturn has led to a decline in sales.
Hugo Boss is targeting growth through retail
expansion, including geographic expansion,
new product categories and by offering more
flexible customer service initiatives. This
includes a restructuring of the supply chain
strategy, logistics and retail competence.
Similarly VFG has also focused on improving
its product range and design team.
In Q4 2009 steps were taken to strengthen
the financial position of the group and in
December 2009 the business completed a
recapitalisation and restructuring of VFG and
the Permira funds’ stake in Hugo Boss. The
transaction, which was consensually agreed
with the group’s lenders, means that VFG’s
debt has been reduced by one third; as part
of this process additional equity was injected
by the Permira funds and co-investors.
The terms of the remaining VFG debt facilities
were amended to provide the financial
flexibility to support the long-term growth
plans of the businesses. Furthermore,
the group structure was reorganised by
separating the ownership of the Hugo Boss
stake from VFG. Hugo Boss and VFG now
continue to be held by Red & Black Lux
through two separate ownership chains.
These changes represent a positive step
forward for the business. Hugo Boss and VFG
now have appropriate financing structures,
which will allow both businesses to work
towards restored growth as the global
economic climate recovers. Consequently,
Hugo Boss and VFG will be able to focus on
growth in 2010, building on successful
expansion in 2009. Hugo Boss will target
retail expansion with a shift towards directly
operated stores and building on womenswear
while accelerating growth internationally;
while VFG will expand its range of accessible
products at attractive price points.
Permira Annual Review 2009 Our Portfolio 55