Strategic Capital Group's (SCG) proposed HK$236 million takeover of Joyce Boutique collapsed last month because the buyer lacked money - not because the retailer lost its Armani franchise, according to Joyce chairman Walter Ma King-wah. The loss of the Armani franchise was 'not the reason for the collapse, because we had told SCG about Armani matters during the due diligence,' Mr Ma said yesterday, seemingly contradicting a joint announcement by the companies. In the May 23 announcement, the companies said a decision had been made to terminate the takeover offer after 'discussions in relation to the impact of the expiry of the [Armani] franchise agreement on the transaction'. The news media had misrepresented the importance of the Armani franchise to the success of the takeover, Mr Ma said. Joyce managing director Adrienne Ma said the announcement consisted of two messages - the expiry of the Armani franchise agreement and the termination of the proposed takeover - and there was no causal relation. In final discussions, SCG told Joyce it did not have sufficient funds to carry out the takeover unless the agreed price was reduced, Mr Ma said. He declined to disclose details of the discussions, except to say Joyce turned down SCG's request, and the takeover was called off with both parties' consent. Mr Ma attributed SCG's troubles to a downturn in the United States in April and May that soured prospects for the Internet investment company, which had planned to float on the Nasdaq market after the proposed takeover. However, SCG vice-president Selina Ip disagreed: 'If you look back to the Joyce announcement on May 23, you will see it clearly explained the circumstances of the termination,' Ms Ip said. The Italian fashion house last month said it would not extend the franchise agreement, effective next February. Under the terms of the proposed takeover announced in April, SCG was to pay Joyce HK$202.8 million in cash for a 51.7 per cent stake. A connected investor of SCG - Elliott Yuen Wai-kuen - was to pay HK$33 million for a 10.7 per cent holding. The proposal valued Joyce's shares at 20 HK cents each, a 20 per cent discount to the company's net asset value. Meanwhile, Mr Ma yesterday dismissed concerns by analysts that the loss of the Armani franchise could crimp Joyce's earnings next year because sales of Armani brands account for about one-third of company revenue. Joyce, which last year changed its fiscal year, had a loss of HK$12.85 million in the year to December 31. In the year to March 31 last year, the company's loss had narrowed to HK$87.85 million from HK$207.23 million a year earlier. Mr Ma said he expected the company to break even next year. '[The Armani franchise agreement] is still eight months away from expiry, he said. 'During this period, we will try to find other brands to fill the vacuum.' Also, Joyce would save about HK$100 million annually on rental and labour costs relating to the Armani boutiques, Ms Ma said.