Luxury in fashion as Louis Vuitton group pays $2.8b for stake

A fringed scarf, $US4195 ($4617). A knitted jacket, $US28,995. A "St Petersburg" coat, $US46,500. These are the prices that customers of Loro Piana are willing to pay for the Italian fabric company's fine wares.

On Monday, a buyer agreed to pay billions for the company itself.

French luxury goods giant LVMH Moet Hennessy Louis Vuitton will pay €2 billion ($2.8billion) for an 80 per cent stake in Loro Piana, adding a famous name to its portfolio. The deal values the company, based in Quarona, Italy, at €2.7 billion.

Under the terms of the deal, Sergio and Pier Luigi Loro Piana, the co-chief executives who are great-great-grandchildren of the cloth merchant Giacomo Loro Piana, will continue to run the company. The family will retain a 20 per cent stake.

"LVMH has proved that it respects and nurtures family businesses and is most likely to respect the values and traditions" of the company, the brothers said in a statement.

The transaction is the latest sign that luxury brands remain attractive to deal makers in a slow economy. While mass-market retailers have suffered since the recession, the high end has been resilient, with wealthy customers willing to pay for luxury products. Loro Piana is expected to generate sales of €700 million this year, LVMH said.

To its fans, Loro Piana is no ordinary luxury retailer. Officially founded in 1924, it can trace its origins to 1812.

For generations, the family business produced fabrics, gaining renown for its cashmere and fine wool. But in the 1990s, after making the training jackets for the Italian equestrian team at the 1992 Olympic Games in Barcelona, it began making sweaters, shawls and other garments.

Some of its most sumptuous items are made with fabric of the vicuna, a South American relative of the llama that Loro Piana says it helped save from extinction. Those products can sell for tens of thousands of dollars; sweaters from other fabrics are more modestly priced around $1000.

Such brands are attractive takeover targets because of the "scarcity" they have cultivated, said David Schick, an analyst with Stifel Nicolaus.

"Companies that stand for something, where the luxury brand has been thoughtfully curated over time, where they haven't overreached what the brand stands for, those are always very interesting," Mr Schick said. "They have built barriers to entry; they have built competitive advantages."Many famed Italian companies remain family owned, but some have recently chosen to sell. Two years ago, LVMH bought Bulgari for about $6 billion. Kering, the parent of Gucci, agreed to buy a majority stake in the jeweller Pomellato in April.

With its goods available in more than 130 boutiques around the world, Loro Piana hopes to sell a particular way of life.

Sergio Loro Piana described his company's products thus: "These are not the needs of a Boston fireman, who wouldn't wear a cashmere coat if you gave it to him, but needs that I have, that my customers have."