Shandong Ruyi to buy control of SMCP, Fresh fashion group

China’s Shandong Ruyi to buy control of SMCP, the French fashion group and owner of the Sandro and Claudie Pierlot brands at €1.3bn including debt. Sandro, Maje and Claudie Pierlot, which sell dresses priced at around €200, operate in the so-called accessible segment of the luxury market, enjoying solid demand among fast-growing middle classes, particularly in countries such as China.

The deal, which is expected to be announced on Wednesday, would mark an abrupt reversal of plans for US private equity firm KKR who bought 65 percent of SMCP three years ago from L Capital, the private-equity investing arm of French luxury group LVMH, and Florac, another buyout group, in a deal that valued SMCP at about €650m including debt. KKR said that this month that it planned to list SMCP on the Paris stock exchange as early as this summer.

The deal is the latest international foray by Shandong Ruyi, which in 2012 led an international consortium to buy Cubbie Station, an Australian cotton farm, for $232m. It had been in talks with SMCP before the flotation plans.
SMCP, which comprises the Sandro, Maje and Claudie Pierlot brands, has enjoyed rapid growth in recent years as its labels tapped in to the accessible luxury market.

The group has more than 1,100 stores worldwide including a recent expansion into Hong Kong and mainland China to cater to the region’s fast-growing middle classes.

The group was originally founded by Evelyne Chétrite and Judith Milgrom, who are sisters. Ms Chétrite began Sandro, which dresses young executives, in the late 1980s. Mrs Milgrom founded Maje, which targets urban teenagers. The two sisters acquired Claudie Pierlot in 2009.

According to the registration statement SMCP filed ahead of its planned initial public offering, the two founders own just over 21 per cent of the group and 14.6 per cent of the voting rights. KKR owns 69.8 per cent, and 78.8 per cent of voting rights.

Group earnings before interest, taxes, depreciation and amortisation last year were €107m, 44 per cent higher than a year earlier. Revenues were €675m, 33 per cent more than in 2014.

Daniel Lalonde, SMCP chief executive, said at the time of the IPO registration filing that the listing would include a capital increase of €150m–€175m. He also said that the money raised would help reduce its €290m debt.

The prior negotiations between KKR and Shandong Ruyi reportedly broke down over the price but also over the amount that the founding sisters would be prepared to sell of their stake. The people familiar with this week’s planned sale announcement said the two sisters would retain a stake in the group.

Last year, SMCP made earnings before interest, tax, depreciation and amortisation (EBITDA) of €107 million on revenue of €675 million.