Mergers & Acquisitions

Ruyi – China’s LVMH – slows acquisition pace after US$4 billion global spree

  • Chairman says the group will focus on integrating existing brands in the short to medium term
  • Some acquired brands have high recognition but ‘far from ideal’ performance
PUBLISHED : Monday, 12 November, 2018, 6:26pm
UPDATED : Monday, 12 November, 2018, 9:38pm

Ruyi Holding Group, the Chinese apparel firm that is taking over Bally International AG, will slow its deal making after announcing more than US$4 billion of overseas acquisitions in the past three years.

The company would focus on integrating existing brands and ease its mergers and acquisitions pace in the short to medium term, chairman Qiu Yafu said on Monday in Hong Kong. In the future, Ruyi would only consider buying labels that are profitable and have high growth potential, according to Qiu.

“Some of the brands that we bought, although they’re heritage brands and enjoy very high consumer recognition, their business performance was far from ideal,” said Qiu, 60.

“We need to give them time – say five years – to turn those brands profitable.”

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The group needed to inject new, trendy elements into underperforming brands and boost their e-commerce offerings, according to Qiu.

It planned to invest more to revitalise labels owned by Hong Kong-listed unit Trinity, which controls British bespoke tailor Gieves & Hawkes, Qiu said. Ruyi saw Trinity’s profit improving significantly next year after increasing online sales in China, he said.

Ruyi is shifting gears after declaring earlier this year its ambition to develop into the LVMH of China.

The company, previously a little-known Chinese textile manufacturer, now owns several European luxury brands after purchases including UK trench coat maker Aquascutum and SMCP SA, the French fashion retailer whose labels include Sandro, Maje and Claudie Pierlot.

Luxury companies such as Gucci owner Kering SA and LVMH Moet Hennessy Louis Vuitton are counting on increasingly wealthy Chinese shoppers for the lion’s share of their growth.

Consumers in the second-biggest economy spent 105 billion (US$119 billion) on luxury purchases last year, almost a third of the worldwide total, a proportion expected to reach 40 per cent by 2024, according to Boston Consulting Group.

SMCP’s brands had increased online sales in China by 40 per cent to 50 per cent this year, Qiu said.

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Ruyi targeted similar growth rates for Trinity following recent partnerships with some online platforms, he said. It took control of Trinity in April, surpassing billionaire brothers Victor and William Fung as the company’s biggest shareholder.

Some of the brands that we bought, although they’re heritage brands and enjoy very high consumer recognition, their business performance was far from ideal
Qiu Yafu, Ruyi

Trinity operates more than 250 stores in Greater China and Europe for Gieves & Hawkes, British clothing label Kent & Curwen, Paris-based Cerruti 1881 and licensed brand D’urban.

Ruyi aimed to complete its purchase of Invista’s Apparel & Advanced Textiles unit, which owns the rights to materials including Lycra and Coolmax fibres, by year-end, Qiu said. It is paying more than US$2 billion to buy the business from Invista, which is an arm of Koch Industries Inc., Bloomberg reported last year.

The Chinese group wanted to learn from LVMH’s multi-brand approach, which allowed a company to harness synergies while preserving each label’s individuality and market niches, Qiu said. It also wanted to match LVMH’s pursuit of high-quality products, he said.

“We understand there’s still a long way for us to reach there,” he said. “We hope to make Ruyi a well-known Chinese equivalent of LVMH in perhaps 30, 40 or 50 years.”

Founded as Shandong Jining Woolen Mill in 1972, near the birthplace of Confucius, Ruyi controls Tokyo-traded Renown Inc. and Shenzhen-listed Shandong Jining Ruyi Woolen Textile Co.

It has also been expanding in the US, cementing plans in 2017 to open a factory in Forrest City, Arkansas, and create as many as 800 jobs.