Valentino in talks to acquire Armani

Valentino Fashion Group approached Giorgio Armani about buying the Italian luxury rival and the two companies have entered into early-stage discussions, Mergermarket reports.

Why it's the BFD: A combination of the two fashion houses would set the foundation for a luxury group with billions in sales along the lines of LVMH, Kering, Richemont or Capri Holdings.

By the numbers: Giorgio Armani generated €6 billion in revenue and €250 million in EBITDA in 2021, per Mergermarket.

• But the EBITDA figure is a decline from €450 million achieved in previous years, the news service adds.
• Giorgio Armani could be valued at around €5 billion, the report says.

Flashback: The namesake designer told Vogue magazine last year that while he's not "slowing down," he also acknowledged his company didn't need to remain independent and that "one could think of a liaison with an important Italian company."

The intrigue: Valentino would be buying a much bigger rival, as it posted just over €1.2 billion in sales in 2021, according to Reuters.

• But Valentino is backed by the deep-pocketed Qatari investment vehicle Mayhoola, which also owns French luxury fashion house Balmain.

Between the lines: While certain subsectors of retail have felt the impact of inflation, the wealthy and aspirational continue to spend on luxury goods.

• The luxury apparel market was valued at $109 billion in 2020 and then grew by about 24% in 2021. In 2022. it is projected to reach approximately $149 billion, according to GlobalData.

• The luxury retail M&A landscape has been characterized by middle-market processes of late, with brands like Isabel Marant and Ganni in play and G-III Apparel's $210 million majority purchase of Karl Lagerfeld.

Yes, and: Giorgio Armani is in good company, with luxury brands such as Tom Ford and Gieves & Hawkes also weighing sale processes.

The bottom line: A major deal involving Armani or Ford would substantially augment luxury M&A volume.