Diesel Owner Keeps Cavalli Option Open Amid Push for Purchases

The Italian owner of jeans maker Diesel SpA declined to rule out a move for Roberto Cavalli as it seeks to add to its roster of fashion brands and position itself as an “alternative to luxury” group.

Cavalli, which according to media reports has held buyout talks with private-equity firm Permira Advisers LLP, “could be interesting,” Stefano Rosso, chief executive officer of OTB, said in an interview at the company’s headquarters in Breganze, Italy. Rosso acknowledged that OTB, formerly known as Only The Brave, doesn’t “feel too comfortable” in the luxury segment where Cavalli operates, but added: “You never know.”

Cavalli, the maker of $1,645 silk dresses, said last month it hadn’t signed any accord regarding a possible sale after the Financial Times reported that Permira had held talks.

Cavalli is a customer of Staff International SpA, OTB’s production unit, which makes clothing and accessories under license for the Just Cavalli line. Revenue at Florence, Italy-based Cavalli was 201 million euros ($275.2 million) in 2013.

OTB is interested in acquiring global brands that operate in the fast-growing contemporary and premium segments, Rosso, 34, said in the interview. The expansion is sought as Diesel sales are pressured by competition from other jeans makers and so-called fast-fashion retailers. Aspirational consumers will probably drive spending on personal luxury goods in the medium-to long-term, according to Exane BNP Paribas analysts.

“Diesel is the bottom of our pyramid and everything we will be looking for is from Diesel and above,” Rosso said.

Fashion Brands

Rosso’s father Renzo co-founded Diesel in 1978 and developed it into a hip lifestyle brand selling everything from $65 fragrances to $250 jeans in more than 400 of its own stores around the world. After taking sole control of Diesel in 1985, Rosso senior expanded into third-party manufacturing in 2000 when he purchased Staff International. Since then, the entrepreneur has acquired a handful of fashion brands including Maison Martin Margiela and folded them into OTB.

OTB revenue reached 1.51 billion euros in 2012, the last year for which figures were available. Earnings before interest, tax, depreciation and amortization were 204 million euros.

The fashion and luxury industry is consolidating as large groups such as LVMH Moet Hennessy Louis Vuitton SA seek new sources of revenue and small companies turn to investors to help fund growth.

Artistic Director

Diesel sales should recover from the second half of 2014 when new artistic director Nicola Formichetti’s first collection hits shelves, Rosso said. Sales of OTB’s “more sophisticated” roster of ready-to-wear and accessories brands such as Viktor & Rolf and Marni will rise at least 10 percent this year, he said.

OTB isn’t currently interested in selling shares in an initial public offering as it is cash positive and has the resources to fund acquisitions, Rosso said.

“It’s something that we’re not looking into right now, but it’s a door that we’re not closing,” he said. “You never know in the future what will happen. Maybe we could go public with some of our brands.”

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