Bankers and financiers in Milan and New York were asking yesterday whether the House of Versace could survive the death of its creator. Like all haute couture, the business is founded on the principle of charging outrageous prices. In London a £1,500 man's navy suit sat alongside a £9,000 pink sheath dress and a £240 pink leather baseball cap.
But in the world of finance, the death of the company's creative spur is bringing hard-nosed questions. For the group had planned to sell shares to outside investors some time next year. The plan would not only have made the Versace family extremely wealthy, it would also have forced the company to adopt a more formal structure and have brought greater outside scrutiny of its affairs.
The Versace family has just given the US investment bank Morgan Stanley a mandate to coordinate the listing of its shares on the stock exchange. Italian newspapers yesterday reported 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 clear out may have been behind reports of tensions between 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.
The crucial question is whether investors are convinced the company can flourish under the direction of Gianni's muse, Donatella. - (Guardian Service)