Eyeing Karl Lagerfeld China, Chinese menswear company Fujian Septwolves has agreed to invest 320 million yuan ($48 million) for the distribution rights to Karl Lagerfeld’s brand in an effort to upgrade its market and expand globally.
The investment plan has two parts. Septwolves will acquire 80 percent equity (worth 240 million yuan (or $36 million) of Karl Lagerfeld Greater China Holdings (KLGC), which holds the rights to distribute Karl Lagerfeld in the mainland. The second part of the deal is Septwolves will invest 80.1 million yuan ($12 million) in KLGC retail operations in China.
For many westerners, Fujian Septwolves may be a foreign name, but it’s a household label in China. Founded in 1990, and specializing in jacket manufacturer, it is known as the “king of jackets.” As a leading Chinese menswear company, Septwolves was listed on the Shenzhen Stock Exchange on 2004. According to the company, by April 2015, the company’s market capitalization was over 12.4 billion yuan ($1.9 billion).
The company said this deal will likely accelerate the transformation of Septwolves’s retail model as it becomes more involved in the accessible luxury business. It is the China distributor for many luxury brands, including the Italian label CANALI, Versace Collection and jewelry brand George Jensen.
At present, KLGC operates in the Greater China region of Beijing, Shanghai and some first-tier cities with six retail stores and one outlet store. According to the Chinese news site Sina Finance, because of the late entry to China, KLGC business has been in slight decline for years, but this deal with Septwolves may likely boost its China sales.
The acquisition of Karl Lagerfeld Greater China is another case of a Chinese fashion group’s recent investment in international brands. Shenzhen China Ellassay has just acquired a 75 percent stake in Vivienne Tam. And Chinese textile group Shandong Ruyi purchased a major stake in high-end French company SMCP, which owns fashion brands Sandro, Maje and Claudie Pierlot.
The recent investment reflects the Chinese fashion group’s ambitions to compete in the global high-end market. With the increasing sophistication of China’s shoppers, international brands are anxious to get a piece of this market. Whereas Chinese fashion companies have the advantage of local resources, the demand and need from both sides make the deal an appealing one for both.