SMCP shares rise on prospect of ownership change (updated)
05/10/2021 20:36
(Updates with details)
PARIS, Oct 5 (Reuters) - Shares of SMCP SMCP.PA rose on
Tuesday as the French fashion company inched towards an
ownership change, prompting an analyst upgrade on expectations
its financially strapped majority shareholder Shandong Ruyi
002193.SZ was on its way out.
Chinese textile and clothing manufacturer Shandong Ruyi
confirmed on Tuesday that its unit European TopSoho had failed
to redeem 250 million euros ($293.35 million) of bonds
exchangeable into SMCP shares.
This means the owners of the bonds will become - at least
temporarily - owners of shares in SMCP, though sources say they
will look to offload them to a buyer.
"The expected impending exit of embattled shareholder
Shandong Ruyi removes a headwind which has raised the risk
profile of SMCP since its IPO, hence we eliminate our
shareholder discount," said Jefferies in a research note,
upgrading the share to "buy".
On Tuesday, a company called Glas SAS which said it was
acting as a trustee for the bondholders, said in a release to
the French market regulator that it now could exercise voting
rights equal to just under 29% of SMCP - effectively showing a
first change of ownership is under way.
Glas said the bondholders it represents did not want as a
group to launch an offer to take over the company - which any
owner above 30% would have to do. This leaves them searching for
a buyer for the stake, through a legal process that will be
managed under British jurisdiction.
"Essentially, SMCP is up for sale," said a source close to
the matter.
SMCP's labels, which include Sandro and Maje, are
outperforming according to social media data, added the
analysts.
Shares closed 6.7% higher on Tuesday after rising by around
10%, hitting their highest level in around four months.
The ownership change could be a drawn-out process, added
Jefferies analysts, noting private equity players and U.S.
affordable luxury groups will likely be interested in acquiring
the group. The source close to the matter said the bondholders
were looking for a single buyer.
Ruyi embarked on a buying spree in 2015, snapping up labels
including Aquascutum, Cerruti 1881 and Savile Row tailor Gieves
& Hawkes with ambitions of building an empire to rival that of
luxury behemoth LVMH but has struggled under the weight of debt
from acquisitions.
The sprawling Chinese conglomerate’s financial difficulties
worsened with the outbreak of the coronavirus in China and it
failed to secure financing for a $600 million deal to purchase
Bally last year.
SMCP recently bounced back from the coronavirus crisis, with
sales up 54.6% on an organic basis, fuelled by appetite in China
for its contemporary French fashion, following a drop in sales
of 24% last year.
(Reporting by Mimosa Spencer and Silvia Aloisi, editing by Ed
Osmond and Marguerita Choy)
((Mimosa.Spencer@thomsonreuters.com;))