Magazine article Newsweek International

It's All in the Bag

Magazine article Newsweek International

It's All in the Bag

Article excerpt

It's a foot long, six inches wide, and fits neatly under the biceps of the world's richest and most famous women. It's only a handbag, but over the past two years, the Fendi Baguette bag has reached fashion-icon status, having been toted by the likes of Sophia Loren, Madonna, Sharon Stone and Liz Hurley. It comes in more than 400 different styles, and like any great accessory, it can make an outfit. It can make a company too, as last week's estimated $545 million sale of Italian fashion house Fendi proved.

Since August, Gucci, Prada, Bulgari, and LVMH Moet Hennessy Louis Vuitton had each been duking it out for a piece of Fendi, the Rome-based house owned and run by five sisters: Carla, Anna, Paola, Franca and Alda. The luxury-goods conglomerates even had competition from an American leveraged-buyout fund, the Texas Pacific Group. For a while it appeared that Gucci had the deal in the bag, so to speak. Late last month Gucci CEO Domenico De Sole bragged that he'd convinced four out of five of the Fendi sisters to sell. But LVMH chairman Bernard Arnault, Europe's most aggressive takeover artist, was not to be outdone. He cleverly teamed up with his longtime competitor Patrizio Bertelli, husband of Miuccia Prada and CEO of their Milan-based company, Prada. Together, the pair purchased 51 percent of Fendi--valuing the entire company at nearly $1 billion.

It was mostly money that swayed the Fendi sisters. Gucci reportedly offered 25 percent less than Arnault and Bertelli were willing to pay. Of course, some of Fendi's suitors complained that the team paid too much; one told NEWSWEEK, "They're throwing money around like drunken sailors." But Arnault and Bertelli also promised to allow the Fendi family to remain active in the company, in design and managerial posts. That helped cinch the deal. "This was a major stumbling block in the negotiations with Gucci," says Cedric Magnelia, an equities analyst for Credit Suisse First Boston in London. "From the Gucci perspective, running the company efficiently could have been encumbered by this family management structure."

In fact, Fendi has long been considered the model for how to run a family fashion house. Founded in 1925 by Adele and Edoardo Fendi, the company quietly built up a reputation for high-quality leather accessories and fine furs. Famed designer Karl Lagerfeld, who reinvigorated Chanel, has designed the Fendi ready-to-wear line since 1965. …

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