Qatar fund set to buy French fashion brand Balmain

By Astrid Wendlandt

PARIS (Reuters) - Valentino owners, the Qatari Mayhoola investment fund, are set to acquire the French luxury fashion label Balmain this week for more than 460 million euros (356.10 million pound), three sources with first-hand knowledge of the matter said.

The deal, which could be announced on Wednesday, marks the end of months of negotiations between the Qataris and Balmain investors, who include Sanofi co-founder Jean-Francois Dehecq and the family of former chief executive and controlling shareholder Alain Hivelin, who died in 2014 at the age of 71.

Hivelin revived Balmain, which was near bankruptcy in 2004, by hiring gifted designers and turning it into one of France's biggest success stories.

Balmain, known for its pricey embroidered military-style jackets, is one of the country's last few remaining major independent fashion labels along with Lanvin and Hermes.

Under the terms of the agreement, Mayhoola agreed to finance Balmain's international expansion as well as the development of an accessories line.

Balmain declined to comment. Mayhoola also declined to comment.

Balmain is mainly a wholesale business with fewer than 10 flagships stores around the world.

The brand has been enjoying phenomenal success, first under the designer Christophe Decarnin from 2006 to 2011 and then under Olivier Rousteing who became one of the fashion industry's youngest creative directors at the age of 25.

Balmain generated some 130 million euros in sales in 2015, the sources said and enjoyed sales growth of some 25 percent – a stellar performance in light of the luxury goods downturn.

Rousteing's active role in social media has been instrumental in boosting the brand's profile. The designer boasts more than 3 million followers on Instagram and regularly posts photos of his jet-set lifestyle and Balmain events, attended by celebrities such as Kim Kardashian.

When Rousteing designed a collection for the fast-fashion retailer H&M last year, his clothes sold out nearly instantly, triggering a frenzy unseen in previous H&M designer collaborations. In some cities such as Seoul, hopeful buyers slept on the pavement in front of the H&M store.

After Hivelin died, Emmanuel Diemoz, who was Balmain's finance director, became chief executive and Dehecq chairman. Dehecq is expected to resign from his post while Diemoz should remain in the executive seat for some time after the deal, the sources said.

The final price, which is unlikely to be disclosed, will depend on how much cash the existing shareholders will take out of the company.

The figure of 460 million euros would value Balmain at around 14 times earnings before interest, tax, depreciation and amortisation (Ebitda), putting it at a premium to Gucci-owner Kering (PRTP.PA) which is on 8-9 times and in line with expensive stocks such as Prada (1913.HK) and Jimmy Choo (CHOO.L), the sources said.

Mayhoola, an investment vehicle with close ties to Sheikha Mozah, the second wife of the former emir, aims to float Valentino in 2017. It also owns controlling stakes in Italian tailor Pal Zileri and British fashion brand Anya Hindmarch.

Pierre Balmain founded his eponymous fashion house in 1945, just before Christian Dior, with whom he worked for years at the Lucien Lelong fashion house.

Tired of having their employer reject their designs, they each started a fashion business and became two of France’s biggest fashion companies.

(Editing by Alexandra Hudson)