REG-Superdry plc Superdry plc: DIS-Disposal

SuperdryAnnouncement

22/03/2023 07:15

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   Superdry plc (SDRY)
   Superdry plc: DIS-Disposal

   22-March-2023 / 07:00 GMT/BST

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                                  SuperdryPlc

                         (“Superdry” or “the Company”)

                                        

    

   22 March 2023

    

   THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF  ARTICLE
   7 OF REGULATION (EU) NO. 596/2014, WHICH FORMS PART OF UK LAW BY VIRTUE OF
   THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

    

                                        

     Superdry brand to expand reach in APAC region following IP agreement.

                                        

   Superdry is  pleased  to  announce  that it  has  signed  an  IP  Transfer
   Agreement (the “Agreement”) with Cowell Fashion Company Ltd (“Cowell”),  a
   listed  company  based  in  South  Korea,  for  the  sale  of   Superdry’s
   intellectual property (“IP”) assets in  certain countries within the  Asia
   Pacific ("APAC") region (the “Disposal” or “Sale”), for an upfront fee  of
   $50 million USD, payable in cash.

    

   Cowell is an  experienced local operator  within the APAC  region and  has
   been listed on the South Korean stock exchange since April 2015.  Cowell’s
   operations focus  on  licensing  and manufacturing  apparel  products  for
   established  global  brands  across  product  areas  including  underwear,
   sportswear, and accessories, and they are ideally positioned to appreciate
   and maximise Superdry’s potential across the region.

    

   The Agreement means Cowell will own and use the Superdry brand in key APAC
   markets, starting with  its home market  of South Korea  and extending  to
   others including  China,  with Superdry  and  Cowell working  together  to
   develop products relevant for those markets.

    

   Superdry  plans  to  build   a  collaborative  partnership  with   Cowell,
   capitalising  on  the  shift  in  consumer  preferences  in  Asia  towards
   lifestyle  product,  by  working  with   Cowell  to  design  and   develop
   market-relevant product which remains  consistent with the Superdry  brand
   heritage.

    

   Superdry will  provide  certain  support  and  know-how  relating  to  the
   Superdry brand to Cowell during  the first two years following  completion
   of the Sale. In consideration for these services, an additional management
   fee of $1.0 million USD, comprising two payments of $500,000 USD each,  is
   also payable, in  cash, directly  to Superdry, with  the first  instalment
   being payable on completion and the second instalment being payable on the
   first anniversary of completion.

    

   Speaking  today  about  the  Agreement  with  Cowell,  Julian   Dunkerton,
   Superdry’s Chief Executive Officer and Founder, said:

    

   “This agreement  offers  the Superdry  brand  a fantastic  opportunity  to
   expand its  global  reach, whilst  providing  additional funding  to  help
   deliver our turnaround programme in  the face of the challenging  consumer
   landscape. I’m absolutely  thrilled by  the opportunity  to work  together
   with Cowell  to  create  inspiring  products  consistent  with  our  brand
   heritage and build out across the APAC market.”

    

   Cowell Fashion Chairman Lee Sun-seop stated his aspirations earlier today:

   "The collaboration  between Cowell  Fashion, which  has state  of the  art
   planning, design, and production know-how,  and Superdry PLC, which has  a
   long history  of  innovation  and brand  power,  can  be said  to  be  the
   beginning of a paradigm shift in the Korean fashion industry. With the two
   companies aligned together  through explosive  synergy, the  plan to  grow
   Superdry into a Superbrand across Asia is an exciting proposition as  long
   term partners.”

    

    

   Nature of the transaction

    

   The Agreement comprises the assignment of  all of Superdry’s IP assets  in
   the APAC  region, but  excludes India,  Bangladesh, Pakistan,  Sri  Lanka,
   Australia and  New  Zealand where  Superdry  will retain  its  IP  rights.
   Superdry will also retain  all its IP rights  outside of the APAC  region.
   The Disposal constitutes the permanent transfer of the relevant IP assets,
   subject to Superdry having  a right of  first refusal to  buy back the  IP
   assets if Cowell wishes to sell or otherwise dispose of any such IP, or if
   Cowell wishes  to  allow any  IP  registrations to  lapse.  The  Agreement
   includes provisions to support long-term collaboration between the parties
   including terms  relating  to:  the  ownership and  use  of  new  designs;
   Superdry facilitating introductions  for Cowell  to third  parties in  the
   APAC  region;  both   parties’  engagement  in   meetings  to   facilitate
   cooperation  between  their  respective  creative  and  production  teams;
   Cowell’s compliance  with  Superdry  brand guidelines;  the  inclusion  of
   restrictive  covenants   which   are  customary   in   IP   ‘co-existence’
   arrangements; and the maintenance and enforcement of IP.

    

   In  addition,  the  Agreement  includes  provisions  granting  Superdry  a
   perpetual, irrevocable, and sub-licensable  licence to enable Superdry  to
   continue manufacturing (or engaging third parties to manufacture) goods in
   the APAC region. It will also allow Superdry to fulfil its obligations and
   contracts with its existing  long-standing wholesale relationships in  the
   region until their expiry, enabling Cowell to focus its initial  attention
   on developing the Superdry brand and presence in its home market of  South
   Korea.

    

   The Agreement contemplates the intention  of Superdry and Cowell to  enter
   into an  ancillary  arrangement under  which  Superdry may  purchase,  and
   Cowell may  supply, certain  finished products.  Any such  arrangement  is
   subject to  both parties  agreeing terms  on sustainability,  quality  and
   pricing and concluding a formal manufacturing and supply agreement.

    

   The Sale, which has  been approved by the  Superdry Board, is  conditional
   on:

    

    a. approval being obtained from Superdry’s shareholders;

    

    b. approval being obtained from Superdry's lender;

    

    c. Superdry and Cowell concluding an escrow agreement for the payment  of
       the consideration into  an escrow  account pending  completion of  the
       Disposal; and

    

    d. Cowell having deposited  90% of the  consideration (being $45  million
       USD) into such escrow account,

    

   (collectively, the “Conditions Precedent”).

    

   Subject to the Conditions Precedent having been satisfied within 3  months
   following the date of the Agreement, with an option to extend that  period
   in certain limited  circumstances, completion  of the  Disposal will  take
   place on the first business  day following satisfaction of the  Conditions
   Precedent.

    

   Background to and reasons for the Sale

    

   Superdry believes that the partnership  with Cowell will provide the  best
   opportunities for the  future growth  of the  Superdry brand  in the  APAC
   region and allows the Company to focus on growing its brand and increasing
   sales  in  its  more  established  territories  where  it  has   strongest
   expertise.

    

   Superdry previously announced its exit from the Chinese market,  following
   an amicable agreement with its former partner, which was finalised in 2020
   after material  losses were  incurred and  has no  plans to  re-enter  the
   market itself in the foreseeable future. Despite its continued presence in
   a number  of APAC  territories, significant  further investment  would  be
   required to rebuild the  Company’s previous scale  and volumes across  the
   other territories in the  region, particularly in  China, and the  Company
   believes this  is  more likely  to  be successfully  delivered  through  a
   third-party partner.

    

   For the financial  year to 30  April 2022,  the IP assets  subject to  the
   Disposal generated approximately 1.2% of total Group sales and contributed
   revenue of  £7.4  million and  profit  before tax  of  approximately  £2.5
   million, excluding centralised costs allocation. The carrying value of the
   gross assets that are included in the Disposal is estimated to be £nil.

    

   Application of the Sale proceeds

    

   Following satisfaction of the Conditions  Precedent, and on or before  the
   completion of  the Sale,  Superdry expects  to receive  total proceeds  of
   approximately £34m net of transaction costs and taxation. The net proceeds
   from the  Sale will  be used  to increase  the strength  of the  Company’s
   balance sheet,  boost  liquidity, and  fund  its ongoing  working  capital
   requirements, including the implementation of a significant cost reduction
   programme. The Company  is also  considering additional  steps to  further
   strengthen its balance sheet in connection with its turnaround  programme,
   which is being delivered  in a challenging market,  which could include  a
   potential equity issue.

    

   Class 1 Transaction

    

   The Sale  constitutes  a  Class  1  transaction  for  Superdry  under  the
   Financial Conduct Authority’s  Listing Rules.  Completion of  the Sale  is
   therefore conditional on the approval of Superdry’s shareholders. Superdry
   intends to  send a  circular to  its shareholders  and convene  a  general
   meeting for  the purpose  of seeking  the required  approval, as  soon  as
   reasonably possible and will make a further announcement when it does  so.
   More details regarding  the Agreement  will be contained  in the  circular
   that will be sent to shareholders in due course.

    

   Peel Hunt LLP and Liberum Capital Limited are acting as Joint Sponsors  to
   Superdry in connection with the transaction.

    

    

    

   For further information

    

   Superdry

    

   Shaun Wills     shaun.wills@superdry.com          44 (0) 1242 586747

    

   Chris Birks                    investor.relations@superdry.com           
    44 (0) 1242 586747

   Chris Macdonald

    

    

   Joint Corporate Brokers and Joint Sponsors

    

   Peel Hunt LLP

    

   George Sellar                44 (0) 2074 188900

   Mike Burke

   Andrew Clark       

    

   Liberum Capital Limited

    

   John Fishley                44 (0) 2031 002000

   Edward Thomas       

    

    

   Media Enquiries  

    

   Tim Danaher                 superdry@brunswickgroup.com                   
     44 (0) 207 4045959

    

    

   The person  responsible  for  arranging this  announcement  on  behalf  of
   Superdry Plc is Shaun Wills, Chief Financial Officer.

    

    

   Inside information

    

   The information contained within this  announcement is deemed by  Superdry
   Plc to constitute inside information as stipulated under the Market  Abuse
   Regulation (EU) No. 596/2014 (as it  forms part of domestic law by  virtue
   of the  European Union  (Withdrawal)  Act 2018).  On publication  of  this
   announcement via a Regulatory Information Service, this inside information
   is now considered to be in the public domain.

    

   Important Notices

    

   Each of Peel Hunt  LLP and Liberum Capital  Limited (together, the  “Joint
   Sponsors”) is  authorised  and regulated  in  the United  Kingdom  by  the
   Financial Conduct Authority. Each of

   the Joint Sponsors is acting exclusively  for Superdry as sponsor and  for
   no one else in connection with  the Disposal, and will not be  responsible
   to anyone other than  Superdry for providing  the protections afforded  to
   the respective clients of  the Joint Sponsors or  for providing advice  in
   relation to  the  Disposal,  the  contents of  this  announcement  or  any
   transaction, arrangement or other matter referred to in this announcement.

    

   This announcement has been issued by,  and is the sole responsibility  of,
   Superdry Plc.  None of  the  Joint Sponsors  or  any of  their  respective
   affiliates accepts any responsibility whatsoever for the contents of  this
   announcement, including its accuracy, completeness and verification or for
   any other statement made or purported to be made by it or on its behalf in
   connection  with  the  Company  or  the  Disposal.  No  representation  or
   warranty, express or  implied, is  made by the  Joint Sponsors  as to  the
   accuracy, completeness or  verification of  the information  set forth  in
   this announcement and nothing in this  announcement is or shall be  relied
   upon as a  promise or representation  in this respect,  whether as to  the
   past or the future. Accordingly, save for the responsibility of the  Joint
   Sponsors under the Financial Services  and Markets Act 2000 (as  amended),
   each of the Joint  Sponsors and their  respective affiliates disclaim,  to
   the fullest  extent permitted  by applicable  law, all  and any  liability
   whether arising in tort, contract or otherwise which they might  otherwise
   be found to have in respect of this announcement or any such statement.

    

   No statement in this announcement is  intended to be a profit forecast  or
   estimate for any period.

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   Dissemination of a Regulatory Announcement that contains inside
   information in accordance with the Market Abuse Regulation (MAR),
   transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   ISIN:          GB00B60BD277
   Category Code: DIS
   TIDM:          SDRY
   LEI Code:      213800GAQMT2WL7BW361
   Sequence No.:  231543
   EQS News ID:   1588677


    
   End of Announcement EQS News Service

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