French luxury conglomerate Kering, facing challenges in revitalizing sales at its renowned brand Gucci, announced on Thursday its acquisition of a 30% stake in the prestigious Italian fashion house, Valentino, from Qatari investment fund Mayhoola. The deal, valued at 1.7 billion euros ($1.87 billion) in cash, also includes an option for Kering to purchase the remaining shares of Valentino’s share capital by 2028.

Kering clarified that this transaction forms part of a broader strategic partnership between Kering and Mayhoola, which may potentially lead to Mayhoola becoming a shareholder in Kering in the future, as stated in their official release.

In the second quarter, Kering fell short of market expectations with a modest 3% growth, lagging behind its competitors, while it strives to revamp Gucci’s performance. To this end, Kering has recently undertaken a management overhaul to reinvigorate the brand.

Comparatively, other luxury companies enjoyed double-digit growth during the same period, with LVMH, a larger rival, reporting a remarkable 21% increase in sales for its fashion and leather goods division, housing iconic brands such as Dior and Louis Vuitton.

Kering attributed its challenges in part to a 23% decline in North American retail revenue during the second quarter, with its CFO, Jean-Marc Duplaix, acknowledging the complexities of the luxury market in that region.

Francois-Henri Pinault, the head of Kering, expressed disappointment with the results, noting that they fell short of the company’s aspirations and potential, particularly at Gucci. As part of their efforts to address these issues, Kering has undertaken significant changes to its management team, including the departure of longtime Gucci CEO Marco Bizzarri.

Upon completing the 30% stake acquisition, Kering will gain representation on Valentino’s board. However, Mayhoola, which acquired Valentino in 2012, will retain the majority share of 70% and continue implementing the successful brand elevation strategy.

The deal for the 30% stake in Valentino is expected to finalize before the end of the year, according to Kering. Valentino, renowned as one of Italy’s most prestigious fashion labels, currently operates 211 directly operated stores and recorded a revenue of 1.4 billion euros in 2022.