the Insiders


November 4, 2010 3:47 PM


Keeping the Dream Alive: Della Valle Courts Saks

It's been a tough run for Saks Inc. lately....

It's been a tough run for Saks Inc. lately.
The retailer lost nearly $11.7 million over the past year; it's unwinding what many considered to be overexpansion. (Did Saks really need to be in Charleston, S.C., where the lease was turned over to Forever 21?), and the department store is only beginning to expand overseas.  

But the dream of Saks Fifth Avenue, the luxe and glamour that walks in on sky-high heels and is handled with well-manicured service, is thriving. 

And investors seem to feel that -- Diego Della Valle especially so. 

The Italian tycoon and chairman of Tod's SpA, who turned his family's shoe business into a global force that counts Saks among its clients, swooped in last month to become Saks' biggest shareholder with control of 19.1 percent of its shares. 

It was no small move; he doubled down while the stock was at a relative high and moved ahead of the world's richest man, Mexican telecommunications billionaire Carlos Slim Helú, who has a 16.1 percent stake. 

Della Valle is a crafty businessman with an international flair who could do many things with his investment. Already, he has said he might use it to gain representation on the firm's board. From that perch, he could push Saks toward an overseas expansion or some other change. He might also try to take control of the company outright, or sell his stake to Slim or on the open market and walk away with a very worthwhile profit. 

Whatever Della Valle's investing rationale is -- and surely there is one -- it seems the dollars and cents will have to accommodate some degree of emotional attachment. 

"Saks is a beautiful investment," Della Valle told WWD. "It's a great company with managers of the highest level. And Saks is in everyone's collective imagination, it stands for America, with Rockefeller Center and Fifth Avenue, for example." 

He went further in an interview with the Italian newspaper Il Sole 24 Ore. "Maybe there's also a sentimental aspect," he said, recalling childhood trips to New York. "I went into that big department store on Fifth Avenue almost every day and it always brought me great happiness. I don't hide that I am proud to have become the primary shareholder." 

There are other high-profile investors buying up big stakes in fashion: Activist William Ackman is making a run at J.C. Penney Co. Inc. and Bernard Arnault, as chairman and chief executive officer of LVMH Moet Hennessy Louis Vuitton, is building an interest in Hermes International. 

Those feel like business deals. 

For Della Valle, Saks seems much more personal. 

And so the dream continues and grows. Pleasantly enough for Della Valle, so does his investment. The stocks and options that he spent $170.3 million accumulating represent a stake that, if fully exercised, is worth $341.4 million.
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