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The stock of Donna Karan International Inc. rocketed 74 percent Monday after French luxury goods group LVMH Moet Hennessy Louis Vuitton announced a two-part transaction that secures Donna Karan trademarks for the luxury-products group and sets up a takeover of DKI Inc. Donna Karan trademarks are the property of Gabrielle Studio Inc., a private company owned by designer Donna Karan and her husband, Stephan Weiss. Both said Monday they’ve agreed to sell their studio for $450 million, subject to a reduction of up to $50 million should LVMH also acquire DKI within one year. DKI, meanwhile, acknowledged that LVMH has proposed $8.50 a share in cash to acquire the publicly traded fashion-design house. DKI said a special committee would “promptly” review terms, which sent the company’s stock up $3.63 Monday to close at the $8.50 proposed takeover price. The news even managed to surprise many in the notoriously snoopy fashion district, which no doubt would have preferred the parade of stories, gossip and lawsuits accompanying Calvin Klein Inc.’s protracted but futile flirtation with a sale last year after retaining Lazard. Wall Street reacted swiftly and confidently nonetheless, indicating by the share-price boost its confidence in DKI’s ultimately agreeing to the proposal and, presumably, to the wishes of the designer. “LVMH has the expertise, resources, global scale and vision to help me realize the full potential of Donna Karan and DKNY as worldwide luxury-lifestyle brands,” Karan said in a statement. “If the board of directors approves this transaction, I intend to fully support LVMH as my partner in the building of the global Donna Karan and DKNY brands.” If completed as proposed, the takeover would value DKI at $195 million, indicating a ratio of nearly 3.5 times trailing 12-month sales. That represents a generous premium, indeed, compared with the 1.0 sales ratio the market presently accords Polo Ralph Lauren Corp. A source called the timing of any deals deliberate, as LVMH insisted on obtaining DK licensing rights before even considering a takeover of the fashion house. LVMH, which has been rolling up high-end fashion brands as if they were tobacco products, said that, once under its ownership, DKI and Gabrielle Studio would most likely be combined. The French added that Weiss and Karan, who founded the company in 1984, would exchange “a significant part” of their DKI shares for those of the new company. Myron Ullman, former head of the DFS duty-free stores prior to their acquisition by LVMH and now No. 2 behind LVMH Chairman Bernard Arnault, said the proposal represented “an excellent opportunity to develop this extraordinary brand.” If so, Donna Karan would join the long list of fashion acquisitions made by Arnault since he based his luxury empire on the purchase of Christian Dior SA two decades ago. His long list of fashion labels now includes Louis Vuitton, Christian Lacroix, Emilio Pucci, Fendi, Givenchy, Kenzo, Marc Jacob and Thomas Pink. The rest of the group is devoted to champagne and spirits. In negotiating their $450 million deal for Gabrielle Studio, Karan and Weiss received financial advice from Credit Suisse First Boston and legal assistance from Skadden, Arps, Slate, Meagher & Flom LLP. Copyright (c)2000 TDD, LLC. All rights reserved.

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