The Chinese government appears to have hit the brakes on the overseas shopping spree of Shandong Ruyi. The Chinese conglomerate has recently demonstrated its ambition to become something of China’s LVMH Group, following its high-profile acquisitions of luxury fashion brands including Bally and SMCP (which owns Maje, Sandro, and Claudie Pierlot).
Its next target was to be Bagir Group. Founded in 1961, Bagir is an Israeli clothing manufacturing company that supplies garments to retailers including high-end players like Brooks Brothers and fast fashion labels such as H&M.
On December 31, Bagir released an official statement stating that the Chinese firm failed to live up to its promise to inject $16.5 million into the company before the end of 2018. The cash was to be in exchange for around 54 percent of Bagir’s enlarged share capital.
The reason for the delay is that “it is taking more time than first envisaged for Shandong Ruyi to receive Chinese Government approval” to complete the deal, according to Bagir. As a result, a new unconditional completion date for the transaction was set for May 30, 2019, by which time Shandong Ruyi will need to pay the remaining $13.2 million in cash. No explanation was given for the Chinese government’s failure to approve the deal by the deadline.
The deal was first announced back in November 2017. Under its terms, Shandong Ruyi’s investment will be allocated to fund the expansion of production in Ethiopia and enable Bagir to score more apparel contracts from large international retailers.
Eran Itzhak, CEO of Bagir Group, told the British fashion media outlet FashionUnited that “both companies are committed to making this partnership work.” He also said Shandong Ruyi remains confident about the completion of the transaction and the new completion date will provide ample time for all parties.
Currently, the company mainly manufactures in African and Southeast Asian nations like Ethiopia, Egypt, and Vietnam. It markets to two main Western countries – the United Kingdom and the United States, according to the company’s website. The acquisition by Shandong Ruyi is also likely to help Bagir Group expand into China, which is, by far, the fastest-growing fashion and luxury market across the globe.
During the New York Times International Luxury Conference in early November, Ruyi’s President Qiu Yafu publicly called for fashion insiders sitting in the audience to hook him up with potential buying opportunities. However, the Bagir case showed regardless of how passionate Qiu is about expanding his luxury and fashion empire, the uncertainties of the Chinese government’s overseas investment policy can easily turn his plans around — at least stall them.
Jing Daily reached out to Shandong Ruyi for comments but failed to hear back as of this publication.