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Armani tightly controlled business empire, left no

children

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Company rejected suitors over the years

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Bylaws limit acquisitions and delay potential stock market

listing

(Adds context and quotes throughout)

By Elisa Anzolin

MILAN, Sept 4 (Reuters) - Giorgio Armani established one

of the world's best-known fashion brands over the past five

decades, and his death inevitably raises questions about the

future of an Italian company whose independence he cherished.

Giorgio Armani, who died on Thursday at the age of 91, was

the sole major shareholder of the company he set up with his

late partner Sergio Galeotti in the 1970s and over which he

maintained a tight rein - of both the creative and managerial

aspects - until the very end.

He has left behind no children to inherit the business, which

generated relatively stable revenue of 2.3 billion euros ($2.7

billion) in 2024, but whose profits had shrunk amid a broad

industry recession.

Despite the slowdown, the company remains extremely attractive,

say industry experts like Mario Ortelli, managing partner of

luxury advisor firm Ortelli&Co.

"Could Giorgio Armani be an interesting target? The answer

is absolutely yes - it's one of the most recognised brands in

the world, with a stylistic vision that is clearly and uniquely

defined," said Ortelli, adding however that a deal in the

mid-term would be unlikely.

Over the years, the maker of popular unstructured suits

received several approaches, including one in 2021 from John

Elkann, scion of Italy's Agnelli family, and another from luxury

brand Gucci, when Maurizio Gucci was still at the helm.

Armani, who industry insiders say was particularly wary of

French rivals, repeatedly ruled out any potential deal that

would have diluted his control and refused to list his group on

the stock market.

He put in place measures to ensure continuity and

independence for his business, which he ran with trusted family

members and a network of long-time colleagues.

He is survived by a younger sister, Rosanna, two nieces, Silvana

and Roberta, and a nephew, Andrea Camerana, with the nieces and

nephew all occupying important roles in the group. His

right-hand man Pantaleo Dell'Orco is also regarded as a member

of the family, and all five of them are possible heirs.

More clarity on his plans may emerge in the coming weeks, when

Armani's will is opened.

SECURING HIS LEGACY THROUGH A FOUNDATION

Giorgio Armani started to think of a plan to guarantee a smooth

succession and to retain the company's independence more than a

decade ago, which led him to set up a foundation in 2016.

Its stated aim was to "safeguard the governance" of the

Armani Group's assets and ensure they remained consistent with

principles that were "particularly important" to him.

The designer told Italian daily Corriere della Sera in 2017 that

such a mechanism was needed to help his heirs to get along and

to avoid the group being bought by others or broken up.

The foundation currently holds a symbolic 0.1% stake in the

Milan-based group but after his death it was expected to get a

bigger share, alongside the other heirs, he said in the same

interview.

He also said that three nominees he had designated would run

the foundation.

Armani also drafted new company bylaws due to take effect upon

his death that outline future governing principles for those who

inherit the group.

The bylaws call for a "cautious approach to acquisitions" and

divide the company's share capital into several categories with

different voting rights and powers. It is not clear from the

document how the different blocs of shares will be distributed.

They also state that any potential stock market listing would

require backing from the majority of directors and could take

place only "after the fifth year following the entry into force

of this statute".

SMALL BUT BEAUTIFUL

Commenting on past financial results, Giorgio Armani underlined

his determination to continue to develop a business which is

relatively small in scale compared with the French giant LVMH

and other rivals such as Gucci-owner Kering

and Italian luxury house Prada.

"I chose in any case to invest in projects of great symbolic

and practical significance, which are fundamental to the future

of the company," he said in the results statement in July.

These investments included the renovation of flagship stores

like its Madison Avenue building in New York and Emporio Armani

in Milan, as well as spending on the new Palazzo Armani in Paris

and taking e-commerce management in house.

Europe generates almost half of the Armani Group's revenue, a

far higher proportion than for other luxury brands, with the

Americas and Asia Pacific accounting for around one fifth each.

The group had 570 million euros in net cash at the end of

2024 after stepping up investments.

ARMANI LIEUTENANTS COULD STEP UP

In his last interview to the Financial Times, Giorgio Armani

said he wanted a gradual handover to his closest collaborators

and family.

"My plans for succession consist of a gradual transition of

the responsibilities that I have always handled to those closest

to me... such as Leo Dell'Orco, the members of my family and the

entire working team," he told the FT's How To Spend It

supplement.

At a managerial level, the group will need to fill the chairman

and CEO roles that were held by Giorgio Armani himself, with

long-term veterans like Giuseppe Marsocci and Daniele

Ballestrazzi among possible options.

Picking the right creative structure may be trickier.

Armani's niece Silvana worked alongside her uncle in

designing the women's collections, while Dell'Orco collaborated

with him on the men's collections.

"Will the company have a single creative director? Or will there

be multiple creative leads or line-specific directors? This is

something Giorgio Armani has probably outlined in the guidelines

that the foundation will implement," said Ortelli.

($1 = 0.8559 euros)