Lebanon's M1 Group close to buying Pepe Jeans

Lebanese investment firm M1 Group is in advanced talks to buy Spanish fashion brand Pepe Jeans in a deal that shows the growing appetite of deep-pocketed Middle Eastern buyers for European assets, three sources familiar with the matter said.

M1, which beat competition from Paris-based private equity firm PAI Partners and Qatar's Mayhoola for Investments, is finalising the financing for the deal, the sources said, speaking on condition of anonymity as the matter isn't public.

Reuters reported in December that Pepe's adviser Morgan Stanley had received interest from Mayhoola, an investment vehicle with close ties to Sheikha Mozah, the second wife of Qatar's former emir, while Western buyout funds were struggling to match the seller's price expectation of at least $792 million.

But Mayhoola, which purchased iconic Italian fashion house Valentino from London-based private equity firm Permira in 2012, has since pulled out, leaving M1 as the final bidder for a clothing portfolio which includes menswear brand Hackett, the sources said.

M1, based in Beirut, operates a diversified portfolio of real estate, telecoms, fashion, and transport assets.

It was established in 2007 by former Lebanese Prime Minister Najib Mikati and his brother Taha Mikati, who also founded telecom operator Investcom.
M1's fashion portfolio includes French high-end tailor Façonnable which was acquired for $210 million in 2007.

In 2011, the Lebanese group teamed up with former Goldman Sachs banker Richard Sharp to bid for British fashion retailer All Saints, but lost out to Lion Capital.
M1, which holds 10 percent of MTN, one of Africa's largest telecom firms, has also been snapping up real estate assets in Europe, the United States and the Middle East.

Pepe Jeans, majority held by private equity firms Torreal, Arta Capital and L Capital, was launched in London by three brothers as a weekend roadside stall in Portobello Road in 1973.

It became an established brand in Britain's fashion industry in the nineties, featuring celebrities such as Kate Moss in its advertising campaigns. It is now present in 60 countries and sells its products through more than 7,000 multi-brand stores.

Representatives at M1 Group, Pepe Jeans, Torreal and L Capital could not immediately be reached for comment. Spokesmen for Morgan Stanley and Arta Capital declined to comment.

$1 = £0.66