Permira Overruns Union, Management Opposition to Squeeze 'Special Dividend' Out of Fashion Firm Hugo Boss
Buyout funds continue to squeeze cash out of the companies they acquire in order to pay off debt and get their money out early.
Permira, Europe's largest private equity fund, has used its 88% stake in leading fashion company Hugo Boss to obtain a "special dividend" of €350 million to repay loans it took on to finance the acquisition. Permira's takeover of Hugo Boss began last year when it took control of parent company Valentino Fashion Group.
Permira paid €2.6 billion, equivalent to ten times earnings before interest, taxes, depreciation and amortization (EBIDTA), a ratio typical of the deals made during the LBO boom before the global credit crisis. Permira followed the Valentino deal by buying chunks of outstanding Hugo Boss stock. Permira reportedly borrowed €1 billion to finance the Boss takeover. At the time, Permira announced its intention to "provide a long-term, stable and supportive ownership structure" for Hugo Boss.
Permira's takeover and associated dividend drive has already brought about the resignation of key management figures, including the former Chairman and CEO. Approval of the special dividend was followed by the resignation of the long-time chairman of the supervisory board. All 5 employee representatives on the Supervisory Board voted against the 2008 special dividend. IG Metall board member Gert Bauer was quoted by the financial press as stating "We fear (the company) will be bled in installments." Permira is said to be planning another special dividend in 2009.