September 27, 2010

Morgan Stanley Taps China’s Nouveau Riche With $42 Million Stake In Sparkle Roll

Sparkle Roll Sells High-End Brands Like Bentley, Rolls Royce, Lamborghini, Boucheron And Duclot

Demand is high in inland areas for ultra-high-end Bentleys

Demand is high in inland areas for ultra-high-end Bentleys

The FT reports today that Morgan Stanley has found a new way to tap the rising spending power of China’s newly wealthy with its purchase of a $42 million stake in the Sparkle Roll Group (formerly the Jade Dynasty Group), which runs Bentley, Rolls Royce and Lamborghini dealerships in Beijing and is the exclusive dealer or partner of brands like Boucheron and Federico Buccellati jewelry and Duclot wines throughout mainland China. The acquisition was made through MSPEA Luxury Holding, which is controlled by the Morgan Stanley Private Equity Asia III L.P fund, which invests money from institutional and private investors.

From the FT:

The investment looks wise, given the growth in luxury consumption in China. The country is set to be the world’s top luxury market in five years – growing to $14.6bn from $9.4bn last year, according to a recent report by the Chinese Academy of Social Sciences.

Macquarie Securities analyst Jake Lynch says:

The fact that [Sparkle Roll] is so geared to the ultra high-end makes it a very high bet. There is not another pure exposure [to this luxury segment].

High-end property developer, FPG Land, is a distant second in terms of tapping China’s rich list, Lynch adds. In operating margins, Sparkle Roll is also well positioned. Its margin in 10.3 per cent, almost double that of other mainland Chinese distributorships like Zhongsheng and Dah Chong Hong. Sparkle Roll’s watch-making business has margins of 40 per cent, according to Macquarie.

The article goes on to point out that while Sparkle Roll has a strong presence in Beijing, its nationwide network is still relatively underdeveloped. This isn’t terribly surprising, since more millionaires call Beijing home than any other Chinese city. However, considering the future of the Chinese luxury industry is inland, in smaller second- and third-tier cities, Sparkle Roll will have no choice but to build its presence outside of Beijing. With the voracious appetite for ultra-high-end cars, jewelry and wine that the inland nouveau riche has consistently displayed, there’s no shortage of demand for the brands Sparkle Roll represents.

Luckily, with the $42 million capital infusion from Morgan Stanley — the news of which sent Sparkle Roll shares up 10% in Hong Kong — it appears that the company is getting a vote of confidence from investors that will go far in helping its broader expansion.

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Tag: acquisition, auto, bentley, duclot... , More
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