Global fash­ion brands the new M&A tar­gets

China Daily (Canada) - - VIEWS - By WANG ZHUOQIONG wangzhuo­qiong@ chi­nadaily.com.cn

In­vestors hope to cash in on lux­ury-savvy world­wide-shop­ping Chi­nese con­sumers

Chi­nese in­vestors are eye­ing renowned but strug­gling in­ter­na­tional fash­ion brands in an ef­fort to cash in on lux­ury-savvy and global shop­ping Chi­nese con­sumers.

A re­port in the Sun­day Times sug­gested that the bil­lion­aire owner of brands in­clud­ing Top­shop, Bur­ton and Wallis was in talks with Chi­nese tex­tiles group Shan­dong Ruyi, which only last week bought Swiss lux­ury brand Bally.

But Ruyi said the com­pany was not in con­tact with Ar­ca­dia Group, and ac­cord­ing to Just­style.com, re­tail gi­ant Ar­ca­dia Group also dis­missed re­ports its owner Sir Philip Green was con­sid­er­ing sell­ing all or part of the Ar­ca­dia em­pire.

How­ever, a fu­ture ac­qui­si­tion of an­other global brand seems to be on the ta­ble for Shan­dong Ruyi, which al­ready owns ma­jor­ity stakes in Swiss lux­ury house Bally and French ac­ces­si­ble lux­ury group SMCP.

Ruyi said “it plans to con­tinue to look for suit­able ac­qui­si­tion tar­gets in ac­cord with its

devel­op­ment di­rec­tion, which is to fo­cus on de­vel­op­ing busi­ness in re­la­tion to its core busi­ness pur­suits”.

The com­pany aims to de­velop into the “LVMH group of China” — a ref­er­ence to the French-based lux­ury con­glom­er­ate, which owns Louis Vuit­ton, Chris­tian Dior and Givenchy, among many oth­ers.

Shan­dong Ruyi has out­lined the kinds of fash­ion brands it is in­ter­ested in ac­quir­ing in the fu­ture, ac­cord­ing to The In­dus­try, a Lon­don-based fash­ion news web­site.

“The brands it is to ac­quire have to be aligned with its cor­po­rate devel­op­ment strat­egy and po­si­tion­ing, have a close link with the cap­i­tal mar­ket, boast good devel­op­ment and high growth prospects, plus be well-loved and rec­og­nized by con­sumers, able to sway fash­ion trends and su­perb in de­sign,” it said.

Ruyi’s busi­ness has been ex­panded to in­ter­na­tional fash­ion brands in re­cent years. In 2016 it ac­quired a ma­jor­ity stake in SMCP from pri­vate equity house KKR for 1.3 bil­lion eu­ros ($1.6 bil­lion).

In De­cem­ber 2016, Ruyi ac­quired Bri­tish her­itage brand Ac­quas­cu­tum from its then owner YGM Trad­ing in Hong Kong and most re­cently it bought a ma­jor­ity stake in Bally from JAB Lux­ury. In 2010, Ruyi be­came the big­gest share­holder of Ja­panese ap­parel group Renown.

In ad­di­tion, China’s Fo­sun group, which owns French leisure group Club Med and a stake in Ital­ian lux­ury menswear firm Caruso, is set to ac­quire a ma­jor­ity stake in strug­gling French fash­ion house Lan­vin, Reuters re­ported ear­lier this month.

In a re­ply to China Daily, Fo­sun said it had no com­ment to make on the deal so far.

Lan­vin, founded in 1889, is cur­rently 75-per­cent con­trolled by Tai­wan-based me­dia mag­nate Shaw-Lan Wang.

Chi­nese pri­vate en­ter­prises have sought to buy dis­tressed over­seas busi­nesses, per­haps with an overly rosy view of their abil­ity to turn the busi­ness around or to cre­ate syn­er­gies with their ex­ist­ing China busi­ness, ac­cord­ing to McKin­sey&Com­pany, a global man­age­ment con­sult­ing firm.

Lux­ury and fash­ion houses in the world have suited the ap­petites for Chi­nese buy­ers, thanks to the re­cov­er­ing growth in the cat­e­gory.

Ac­cord­ing to Bain & Com­pany’s 2017 China Lux­ury Re­port, Chi­nese spend­ing on per­sonal lux­ury goods started to bounce back in the third quar­ter of 2016 and showed strong growth in 2017, with the do­mes­tic mar­ket out­grow­ing over­seas pur­chases and reach­ing 20 per­cent growth.

“We ex­pect the strong mo­men­tum of the do­mes­tic mar­ket to con­tinue, fu­eled by mil­len­ni­als and strong com­ple­men­tar­ity be­tween off­line and on­line to drive traf­fic into stores,” said Bruno Lannes, a part­ner at Bain’s China of­fice, and the author of the re­port.

The brands it (Shan­dong Ruyi) is to ac­quire have to ... be well-loved and rec­og­nized by con­sumers ...”

Shi Jing con­trib­uted to the story.

BLOOMBERG VIA GETTY IM­AGES

Pedes­tri­ans walk past a Bally In­ter­na­tional AG store in Syd­ney, Aus­tralia.

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