Versace, the Italian luxury fashion brand, is on the verge of being sold to American handbag maker Michael Kors in a deal reportedly worth as much as $2bn (£1.5bn).
The takeover would form part of Michael Kors’ attempts to build an American rival to giant European luxury holding companies LVMH, Kering and Richemont, after it splurged £896m on London-based shoe maker Jimmy Choo last year.
Was this a good deal?
Yesterday the stock price of Michael Kors (KORS) declined by 8% and the shares are now trading around the area of $67 per share. I think that over the longer term, Michael Kors did a good deal.
In this day and age, in order to prosper in this sector, economies of scale and risk appetite are very important. This is something that a family-oriented brand cannot easily obtain.
From a technical perspective, I would wait until the price is down in area $60 per share before buying. As we can see from the chart below, that area represents a good support level.
From a fundamental perspective, a P/E ratio of 15 seems to be in line with the potential growth of the company. Furthermore, we can see that over the years the company has continued to generate high levels of revenues and profits.
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Article written by Luca Discacciati