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Permira Closes in on Fashion House Valentino

Private equity firm Permira is in exclusive talks to buy more than half of famed Italian fashion house Valentino, it said on Friday, dimming the chances of a bid battle with U.S. rival Carlyle.

Sources close the negotiations said the move by London-based Permira had almost certainly shut out the prospect of Carlyle launching a rival bid for Valentino whose wardrobe of brands also includes Hugo Boss and Marlboro Classics.

Permira, which already owns a 29.6% stake in the gown maker, said in a statement it was negotiating to pay 35 euros a share excluding a dividend for another 24%, valuing the company at around 2.5 billion euros.

Should it succeed Permira would be forced under Italian law to launch a full takeover of the fashion house famous for dressing stars such as Julia Roberts, Sophia Loren and Jackie Kennedy Onassis in its floor-sweeping gowns.

Valentino shares fell more than 4% to 35.2 euros as investors saw the prospect of a bid war ebb, having hit a record on Thursday on expectations Permira and Carlyle would compete for the house founded by Valentino Garavani 45 years ago.

"The game is more or less over," one of the sources close to the negotiations said.

Private equity firms are showing increased interest in the fashion world with no sign of a let-up in booming sales of luxury goods in emerging economies like China, India and Russia.

Shares in Hugo Boss rose nearly 3% on Friday amid expectations Permira will be forced to buy the company if it succeeds in its takeover of Valentino Fashion.

Frock Finance

Permira's move follows Hilco Consumer Capital and Hollywood movie mogul Harvey Weinstein's purchase in March of the Halston fashion house whose clients have included Elizabeth Taylor and Andy Warhol.

Change Capital bought Jil Sander from Prada last year and TowerBrook Capital Partners bought out shoemaker Jimmy Choo in February.

Permira's exclusive negotiations, with shareholders from the Marzotto family, Valentino's majority owners and one of Italy's oldest fashion and textile clans, will expire on May 28.

Carlyle had been considering offering as much as 36 euros per share for the whole of Valentino before Permira swooped in to buy more than a quarter of the stock, disrupting its plans, sources close to the matter told Reuters this week.

The U.S. private equity giant said on Thursday it had not yet made a final decision on whether to bid.

The Marzotto family, which controls Valentino through several holding companies, including Tidus and PFC, spun off its fashion assets in 2005 creating Valentino Fashion.

Permira said in its statement its negotiations involved the possibility of those shareholders retaking a stake in Valentino should it gain control.

Holding company Canova Partecipazioni, which owns a 19% stake and is co-managed by Valentino Fashion Chairman Antonio Favrin, said in a statement it was staying on the sidelines of the negotiations for time being.

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