Jimmy Choo draws preliminary interest from Fosun – source
08 MAY 2017
The potential sale of London-based Jimmy Choo [LON:CHOO], the luxury shoemaker, has attracted preliminary interest from Chinese buyers including Fosun Group, a source familiar with the matter said.
Fosun is in contact with Citigroup, Jimmy Choo’s advisor, regarding the potential sale, and its internal team is examining a potential bid, the source said.
The deal size could be around GBP 800m which is about Jimmy Choo’s current market cap at GBP 790m, the source added. The figure does not take into account Jimmy Choo’s net debt which stands at GBP 139m as of December 2016.
Other interested Chinese bidders could include private equity firm Hillhouse which is in the process of buying out Belle International [HKG:1880], Chinese’s largest shoe retailer along with CDH Investments, the source and another source briefed on the matter noted.
The board of Jimmy Choo announced on 24 April to start a strategic review of the company, including a possible sale. Its majority shareholder JAB Luxury, with a 67.66% stake, has confirmed to be supportive of the process.
The announcement is also notable for revealing that the UK’s Takeover Panel has granted a dispensation from certain Code requirements such that any interested party participating in the formal sale process will not be required to be publicly identified as a result of this announcement and will not be subject to the 28 day Code deadline.
There have been no takeovers of UK listed companies by Chinese acquirers since 2012 because the two countries M&A regimes oppose each other, as previously reported by Dealreporter’s Asia Flash.
In 2011, for example, the Takeover Panel prevented China Guangdong Nuclear Power Holding Corporation (CGNPC) from reducing its offer for Kalahari Minerals following the Fukushima nuclear disaster, although the deal was eventually done at a later date. In 2012, Chengdu Geeya Technology [SHE:300028] successfully completed its acquisition of Harvard International but only after securing eight deadline extensions from the Takeover Panel to its 28 day deadline, allowing the buyer to secure regulatory approvals.
However, the Code dispensation and JAB’s position as controlling shareholder may facilitate a Chinese bid in this instance, this news service noted.
The potential sale has drawn strong Asian buyers interests because China and Japan were the fastest growing regions for Jimmy Choo due to strong brand awareness and weak sterling, the first source said.
However, there is also concern about the rising rental cost in first and second tier Chinese cities as well as the shifting taste of the younger consumers who favor boutique designer brands over traditional luxury brands, the source added.
Shanghai-based conglomerate Fosun has strong presence in global retail and fashion industry, the source pointed out. It is the second largest shareholders in Greek fashion brand Folli Follie which retails women’s handbags and accessories with strong presence in China and Hong Kong. It also invested in American high-end women's clothing brand St. John, Italian high-end custom men's clothing Caruso, and fashion lifestyle brand Tom Tailor, according to its public filings.
Apart from Chinese interested buyers, Coach [NYSE:COH] was reportedly mulling a possible acquisition of Jimmy Choo. Today, 8 May, Coach announced it would buy Kate Spade [NYSE:KATE] in a deal valued at USD 2.4bn.
JAB has retained BofA Merrill Lynch and Citigroup as financial advisors regarding the strategic review and it expects to complete the review in the second half of this year, according to the announcement..
Best known for its tottering heels for women, Jimmy Choo was founded in 1996 by former Vogue accessories editor Tamara Mellon and Malaysian designer Jimmy Choo. It retails menswear, shoes and accessories and runs licensing business including fragrance and eyewear, according to its website.
Fosun declined to comment. Hillhouse and JAB did not respond to a request for comment.