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G-III Buys Donna Karan from LVMH, Stock Plummets

In a strange twist of fate, LVMH Moët Hennessy Louis Vuitton has agreed to sell Donna Karan International, the parent company of Donna Karan and DKNY, to G-III Apparel Group for $650 million.

G-III investors weren’t pleased with the news: its stock (GIII) dropped by as much as 6 percent in early trading Monday, while LVMH shares inched up by more than 1 percent in Paris.

The French luxury giant, which bought the business in 2001 for $643 million, tried repeatedly to revive the Donna Karan and DKNY lines in recent years, dropping offshoots DK Jeans and DKNYC in an effort to focus on core collections. Last summer, Donna Karan herself left the company and her eponymous line was put on hold.

Donna Karan International is an iconic global fashion company. Its lifestyle aesthetic resonates well with consumers throughout the world. We are excited to build upon its strong foundation as we seek to capitalize on a significant market opportunity. Donna Karan brings increased scale and diversification, while providing incremental growth on top of our portfolio of some of the best fashion brands in the world,” Morris Goldfarb, chairman, chief executive officer and president of G-III, said. “We believe we are well positioned to create and sustain additional value for our shareholders, partners and customers.”

“We believe the DKNY brand has a dynamic position in the market and when G-III approached us about acquiring the brand, we concluded that the time was right and that G-III was the right steward going forward,” Toni Belloni, group managing director of LVMH, said. “We are pleased to have reached an agreement with G-III, a company that has the expertise and capabilities to broaden the brand’s distribution and take it to its next level of success. We are grateful to CEO Caroline Brown, creative directors Maxwell Osborne and Dao-Yi Chow, and the entire management and design teams for the strategic actions that created a platform to support DKNY’s continued growth.”

The transaction is expected to close late this year or early next. G-III said it expects the acquisition to be dilutive in the fiscal year ending Jan. 31, 2018, and accretive thereafter.

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The New York-based company—which owns Vilbrequin and has fashion licenses under the Calvin Klein and Tommy Hilfiger brands—plans to fund the purchase through new indebtedness, $75 million of newly issued G-III common stock to LVMH, and a $75 million 6.5 year seller note.

In connection with the acquisition, G-III has also obtained financing commitments from Barclays and JPMorgan Chase Bank for a $525 million asset-based lending credit facility and a $450 million 6-year term loan.