FRANKFURT, Germany - Italy's Marzotto family bought Hugo Boss shares worth around half a billion euros ($565 million) on Tuesday, taking advantage of private equity firm Permira's gradual exit to regain a substantial stake in the German fashion group.

The deal gives the Italian family a direct 7 percent stake in Hugo Boss, almost eight years after it divested its majority holding in the fashion group, along with the Valentino label, to an investment vehicle majority-owned by Permira.

It has had an indirect holding in Hugo Boss because it owns a minority of the investment vehicle - Red & Black - but multiple share placements over the past few years have reduced Red & Black's stake.

The sale of 5 million shares to the Marzotto family on Tuesday, along with the placement of 9 million shares on the market, shrank Red & Black's holding in Hugo Boss to 12 percent from 32 percent. Permira owns 60 percent of Red & Black.

Hugo Boss's stock has more than doubled in value since Red & Black took it over for 5.3 billion euros in 2007.

Best known for its men's suits, the group has invested in womenswear and own retail stores, boosting its annual sales by almost 60 percent to about 2.6 billion euros during that time. Its earnings before interest, tax, depreciation and amortisation (EBITDA) have more than doubled to 591 million euros.

Two traders told Reuters that Red & Black placed the shares at 102 shares each. That was well below Monday's closing price of 109.60 euros, and Hugo Boss shares fell as much as 5.6 percent to 103.50 euros on Tuesday.

"The sale of a surprisingly large package of shares noticeably weighed on Hugo Boss's share price today, but the end of placements by Permira that this signals should all but remove a potential factor holding back the stock," NordLB analyst Wolfgang Vasterling said.

The placement also increases Hugo Boss's free float to more than 75 percent, increasing its weighting and potentially making it a candidate to eventually ascend to the blue-chip DAX index from its current spot on the mid-cap index, some analysts said.

€1 = $1.13/£0.74