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What’s the latest on SMCP’s ownership?

By Angela Gonzalez-Rodriguez

Oct 30, 2021

Business |ANALYSIS

Image: Sandro, official website

The French fashion group might be experiencing a change in ownership pretty soon, after months’ worth of financial ups and downs, changes at the top, and a complex retail environment. Here’s the latest on the future of the parent group of Sandro, Maje, and Claudie Pierlot.

At the beginning of October, Chinese textile and clothing manufacturer Shandong Ruyi confirmed that its subsidiary European TopSoho, had failed to redeem 250 million euros of bonds exchangeable into SMCP shares.

After defaulting on those exchangeable bonds, Shandong Ruyi’s stake in SMCP has dropped from 53 percent to 24 percent. The Chinese group’s voting rights have also substantially decreased, from 67 percent to 37 percent, according to Jefferies analyst Kathryn Parker.

Three weeks later, Glas SAS, a company acting as a trustee for those bondholders, said in a release to the French market regulator (AMF) that it could exercise voting rights equal to just under 29 percent of SMCP. Market experts have been quick to point out this could be showing that change of ownership is under way for the French fashion group.

Glas declared to the AMF that it crossed the threshold of 25 percent of the capital on October 28, 2021 and lowered the threshold of 25 percent of the voting rights of the company SMCP and held in this case 28.99 percent of the capital and 22.31 percent of the voting rights of this company.

Bondholders don’t want to buy SMCP

The bondholders’ trustee also said they didn’t want to launch an offer to take over the company as a group – what they’d be required to do should they exceed the 30 percent ownership threshold. That means that the group of bondholders is likely looking for a buyer for their collective stake.

In the meantime, the fashion group was quick to ensure that “SMCP reminds that this situation does not affect its own financing and operations. Value creation for all of the group’s stakeholders (shareholders, employees and other partners) is at the heart of the company’s strategy. SMCP and its teams remain fully committed to the implementation of the One Journey strategic plan to 2025.” On the wake of the news, shares of SMCP (SMCP.PA) rose, prompting an analyst upgrade. “The expected impending exit of embattled shareholder Shandong Ruyi removes a headwind which has raised the risk profile of SMCP since its IPO, hence we eliminate our shareholder discount,” said Jefferies in a research note, upgrading the share to “buy”.

Shandong Ruyi began purchasing labels in 2015, acquiring London upscale label Aquascutum, Savile Row tailor Gieves & Hawkes and Paris-based fashion house Cerruti 1881. Paying for those soon turned into a substantial financial burden for the LVMH contester wannabe. The Chinese conglomerate’s financial difficulties worsened last year, when it failed to secure financing for a 600 million dollars deal to buy Bally.

In August this year, Daniel Lalonde left the helm of SMCP after serving as CEO for eight years. Under his management, revenues at the parent group to Maje and Sandro labels more than doubled, while the company opened hundreds of international stores. Soon after came the sale to Shandong Ruyi. In 2017, the contemporary fashion group went public on the Paris Bourse.

As of late, SMCP’s historic focus on apparel and brick-and-mortar stores have hindered its expansion since the pandemic broke. Its second-quarter sales came in 14 percent down compared to the same period in 2019.

Image: Sandro official website