Gucci said it has reached an agreement with French tycoon Francois Pinault's Artemis SA to acquire Sanofi Beaute for $1 billion (1.03 billion euros). Sanofi Beaute controls Saint Laurent and a slew of perfume brands including Fendi, Van Cleef & Arpels, Roger & Gallet and Krizia.

Artemis will retain the haute couture business as part of the transaction, which will be run independently from other Yves Saint Laurent operations. The transaction has been in negotiations for several months but was held up by a series of snags, including the question of how to compensate Saint Laurent's co-founder and chief executive, Pierre Berge, for ceding management control to Gucci. Gucci said Monday that Berge and co-founder Yves Saint Laurent, who still designs the brand's haute couture collections, will continue to advise Yves Saint Laurent and Yves Saint Laurent Parfums.

Gucci intends to develop the core brands of Sanofi Beaute's prestige perfume business by launching new products and enhancing marketing. "Gucci expects the development of the Yves Saint Laurent brand and image to provide the basis for additional growth in revenues and profits in the fragrance business," the group said. People familiar with the transaction have said that the rest of Saint Laurent's activities would be acquired and run by Gucci's chief executive, Domenico De Sole, and its creative director, Tom Ford.

The transaction is Gucci's first major step toward becoming a multibrand luxury company to rival French champagne-to-luggage conglomerate LVMH Moet Hennessy Louis Vuitton SA. Gucci earlier this year fended off what it called a "creeping takeover" by LVMH by bringing in Pinault's retail group, Pinault Printemps Redoute SA, as a dominant shareholder, with a 42 per cent stake.

Since then, the two companies have been battling for control of a host of luxury groups as the industry goes through a wave of consolidation. Gucci is also reported to be pursuing Italian shoemaker Sergio Rossi, but officials at both companies say reports of an imminent deal are premature. Gucci Monday reported revenues of over $302 million in the third quarter ended October 31, a rise of 19 per cent compared with $253 million in the same period last year. This is the highest quaterly revenue figure for the group, and De Sole said he is "extremely pleased" with Gucci's performance.

Separately, LVMH, which has been on a buying spree of its own recently, is close to completing the acquisition of British art-auction house Phillips, according to people close to the transaction. The purchase, to be made through LVMH's venture-capital arm LV Capital, is valued at as much as 80 million euros ($129.8 million).

The Wall Street Journal