Versace without the maestro

The Versace family has just given the US investment bank, Morgan Stanley, amandate to co-ordinate the listing of its shares on the stock exchange. Italian newspapers reported on Thursday that up to 30 per cent of the company was to be floated on the Milan exchange, raising a minimum of $350 million and valuing it at more than $1.4 billion overall.

Last year, the group reported consolidated revenues of 845 billion lire and profits of 175 billion lire. Clothing made up 56 per cent of its sales, and accessories a quarter, with fragrances sold under the Versace name accounting for 15 per cent. The remaining 4 per cent came from items for the home.

Versace prospered mightily during the 1990s but had run into problems even before Gianni’s death. These are less to do with the business itself than with the activities of those around it. In May this year, Gianni’s brother, Santo, was convicted of bribing tax inspectors and sentenced to 14 months in jail. He is appealing against the sentence. Unfounded speculation about Gianni’s links with organised crime won Versace an apology and cash settlement from a British newspaper.

But the Versace business seemed to concede that it would have to change its business practice if it was to prosper as a publicly owned firm. As a privately held company — it was owned 45 per cent by Gianni, 35 per cent by Santo and 20 per cent by their sister Donatella — it had few obligations to offer transparent financial statements and hefty incentives to hide much of what was really going through its books.

An outsider, Jean-Marc Russenberger, was hired last year to split what the company owned. This clearout may have been behind reports of tensions betweeen the siblings. The first formal step in the tidying up was last May when it emerged that Gianni Versace SpA, the group parent company, had conferred property worth 150 billion lire on to Ordersystem, a tiny company owned by the three Versaces. Ordersystem also received share holdings.

The crucial question is whether outside investors are convinced that the company can flourish under the direction of Gianni’s muse, Donatella. Many in Milan feel the flotation will go ahead, but perhaps later than planned.

“The business reasons for floating the company haven’t gone away,” said one Milan analyst. Paul Gordon, who follows the sector for IMI-Sigeco Sim, a Milan broker, said investors would be reassured by the fact the family are to invest back into the company a large proportion of the money that they will receive from the sale.

And for Carlo Pambianco, an industry consultant who has worked closely with the company, the plans are advanced enough to have a life of their own. He said: “The strategies have been decided upon, the products and the brands are in place, and the company is geographically well-placed.” He added: “The style is very strong, very recognisable, and could be taken forward by another designer.”

But in New York — where the shares may also be listed — opinions were divided on Versace’s prospects of a successful float. Alan Milstein, a fashion industry consultant, said: “It all depends on the quality and integrity of the product and on advertising. Donatella is a master at this, like her brother was.” He added: “Will investors buy it? That all depends on the state of the books.”

John Glover, Mark Tran and Sarah Ryle;The Observer News Service