China’s Biggest Luxury Brand Acquisitions of 2017

At a time when the government is tightening control over capital outflows, Chinese companies have nevertheless been aggressive in acquiring foreign luxury brands. In 2015, Chinese enterprises spent over 103 billion on foreign brands. In just the first four months of 2017, they had already spent 92 billion. For Western brands, a Chinese partner could be crucial for international expansion, providing strong financial backing and access to new sales channels, which are especially dynamic in China itself. Below is a timeline featuring the most noteworthy luxury brand deals in 2017, from Baccarat to Karl Lagerfeld. June 1, 2017 Fortune Fountain Capital — Baccarat Last summer, Fortune Fountain Capital (FFC) finalized the acquisition of French luxury crystal maker Baccarat. FFC acquired an 88.8 percent stake for 164 million euros (US184 million) from investment firm Starwood Capital Group and L Catterton, a private equity firm worth over 14 billion. Established in 2011 by descendants of a famous calligrapher, Wang Xizhi, FFC started as a family wealth management house. The Beijing-based financial group now provides asset and equity investment. It has Assets Under Management (AUM) of RMB 50 billion, according to Yahoo Finance. In 2016, the group acquired Honey New Zealand with the Sunshine Insurance Group, who purchased the Baccarat Hotel in New York for 230 million. June 9, 2017 Global Brands Group (Hong Kong ) and Marquee brands — BCBG Global Brands Group Holding and Marquee offered 23 million to acquire BCBG Max Azria Group, which filed for bankruptcy in February. The agreement gave Global Brands Group ownership of the operating assets of BCBG as well as the licenses for BCBG products. Marquee received ownership of intellectual property assets. Global Brands Group is part of the Fung Group, which manages licenses for dozens of companies including Calvin Klein, Under Armour and Juicy Couture, and owns brands including Frye. Marquee Brands is a brand acquisition, licensing and development company that owns British menswear brand Ben Sherman, surf line Body Glove and Bruno Magli, an Italian fashion line. August 8, 2017 Shenzhen Ellassay Fashion — Vivienne Tam Shenzhen Ellassay Fashion this year bought 75 percent of Vivienne Tam’s operations in Mainland China for 37 million yuan (5.5 million). The predecessor to Ellassay Fashion Co. was founded in 1999 by Xia Guoxin, now chairman of the company, and his wife Hu Yongmei. They became billionaires in 2015 after the company’s IPO. Since the company went public on the Shanghai Stock Exchange roughly two years ago, it has spent nearly 800 million yuan in the acquisition of four overseas brands: German fashion brand Laurél, U.S. brand Ed Hardy, French fashion brand IRO and now Vivienne Tam. Some analysts worry that the foreign labels Ellassay has acquired are not very well known in China. Despite that criticism, the company said its goal is to grow from “a single brand to multi-brand Chinese high fashion group.” They are planning to buy about 10 brands in the next five years to cover more product categories and make an appeal to a wider demographic. August 21, 2017 Septwolves — Karl Lagerfeld Septwolves this year acquired an 80 percent stake (worth 36 million) in Karl Lagerfeld Greater China Holdings (KLGC), which owns the Karl Lagerfeld trademark in greater China. They also ploughed 12 million into Karl Lagerfeld (Shanghai) Ltd., KLGC’s retail operation in mainland China. Founded in 1990, Septwolves specializes in the manufacture of jackets. As a leading Chinese menswear company, Septwolves was listed on the Shenzhen Stock Exchange in 2004. According to the company, by April 2015, the company’s market capitalization was over 12.4 billion yuan (1.9 billion). On September 16th, it was reported that Septwolves are among the few companies to submit bids for Swiss luxury fashion brand Bally. The relationship between the two brands dates back to 2014 when Bally’s global director Graeme Fidler became the top creative director at Septwolves menswear. Analysts reasoned that because both Karl Lagerfeld and Bally are female-focused, it made sense for Septwolves to invest in them, hedging against the limitations of the menswear business. How the company does managing luxury brands and womenswear are yet to be determined. Other bidders interested in Bally include Itochu from Japan and China’s Fosun International. Oct 17, 2017 Hony Capital — Mr & Mrs Italy In October, Chinese private-equity firm Hony Capital agreed to buy a 30 percent of Milan-based fashion brand Mr&Mrs Italy. Financial details of the deal were not disclosed. Backed by Legend Holdings, Hony Capital plans to expand Mr & Mrs Italy’s distribution in China, where demand for luxury brands is growing, said Bing Yuan, managing director at Hony Capital, citing “increasing demand for aspirational lifestyle and quality products.” Hony Capital competed to buy Jimmy Choo earlier this year, but the deal ultimately went to Michael Kors for 1.2 billion. The private-equity firm has approximately 10 billion assets and has made over 90 deals in 14 years. In 2014, for instance, they bought PizzaExpress for £900m. December 19, 2017 Fosun — La Perla? Chinese conglomerate Fosun has been on a fashion brand buying spree in recent years with the clear intent of targeting the increasingly wealthy Chinese middle class. It invested in upscale American apparel brand St. John, Greek jeweler Folli Follie, and expressed an interest in bidding on Michael Kors. On December 19th, China’s Fosun was in exclusive talks to buy Italian top-end lingerie brand La Perla, and is now completing an exclusive 30-day due diligence investigation of La Perla. Fosun announced a US600 million joint investment fund with Prudential Financial in 2011, whose goal is to invest in Chinese companies as well as foreign firms.

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China’s Biggest Luxury Brand Acquisitions of 2017