The deal, hot on the heels of Kering’s acquisition of high-end perfumer Creed, highlights the return of big-ticket M&A activity in the sector as luxury groups look to diversify sources of revenue against an uncertain economic background and slowing demand.

It also paves the way for the Qatari royals to play a higher-profile role in the 400-billion euro luxury goods market, traditionally dominated by family-owned European companies.

The Valentino investment is part of a broader strategic partnership between Kering and Mayhoola, which could lead to Mayhoola becoming a shareholder in the French group, Kering said late on Thursday.

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In five years Mayhoola could further increase its stake by selling the remaining 70 per cent of Valentino to Kering for a mix of cash and Kering shares, the source said. Mayhoola bought the Rome haute couture house in 2012 from private equity fund Permira for around 700 million euros.

“The emir does not want to sell out of luxury. This is a transaction that gives Mayhoola the chance to still play a big role in the sector but as part of a much bigger entity,” the source said.

The two have a period of time ahead of them to see if they get along, the source added. Mayhoola did not immediately reply to a request for comment.

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Long-term approach

Kering has a market capitalisation of 67 billion euros.

The 1.7 billion euro price tag it is paying for the 30 per cent stake in Valentino implies an enterprise value of around 19 times the Italian company’s 2022 core profit, according to Exane-BNP Paribas analysts. “Higher multiples are likely to acquire a controlling stake,” the analysts said in a note.

The deal between Kering and Mayhoola was agreed in less than three months, with the heads of the two groups starting to talk in May, the source close to the transaction said.