CASE STUDY
EPISODE OF
LANVIN & FOSUN
2023 APRIL ISSUE
Written by Andrew Sia
From the Desk of the Publisher
Lanvin, a fashion company founded in 1889, was acquired by Fosun in 2018. Fosun Group is not without its problems as it has so many different companies under different industries that it acquired when the interest rate was low. It has now to put Lanvin in the SPAC to raise fund, and instead of hoping to raise $544 million, it was only able to raise $150 million.
China, as the market, has been given the impression that it is the largest market for the luxury goods. But the three years of Covid would have caused a lot of cash-drain for the nation that it foreign exchange reserves would have eroded.
Although its zero-Covid policy has been lifted and all the markets are expecting the Chinese customers to flood the market, this can perhaps be too much of a wishful thinking. There are so many factors to consider even if we are all craving for normalcy.
Guo Guangchang of Fosun acquired a controlling stake in Lanvin in February 2018, in France’s oldest luxury couture house. The transaction was completed in early April of the same year.
Lanvin was founded in 1889 by Jeanne Lanvin and has long been synonymous with Parisian elegance and style. Lanvin operated in more than 50 countries in the world, designing, producing and selling womenswear, menswear, kidswear and accessories including footwear and leather goods. The Lanvin Group is consisting of the original Lanvin brand, Sergio Rossi, the Italian shoemaker, and American knitwear company, St. John.
This has now been acquired for five years and the owner, Guo Guangchang, obviously a billionaire, is planning to take Lanvin public as he struggled to pay down a $36 billion debt pile which he accumulated in his shopping spree for tourism, football and insurance. But the 135-year-old remains far behind rivals Chanel, Dior and Hermès in the biggest consumer market.
The share sale was planned via a special purchase acquisition company (Spac) in the U.S. which initially gave Lanvin Group an enterprise value of $1.5 billion. But in October, the valuation was lowered to $1 billion, and the Spac deal was criticized by a minority shareholder. And China’s hard stance on Covid-19 was not helping the situation either.
Lanvin’s experience under Fosun’s control is emblematic of a turbulent period for an aggressive dealmakers such as Guo and the international marquee companies during an explosion in acquisitions in the mid to late 2010s.
Same happened with another heavily indebted Jining-based conglomerate, Shandong Ruyi, who in 2017 acquired the British label Aquascutum, Savile Row tailor Gieves & Hawkes, and Israeli tailor Bagir have ended up in liquidation.
In 2020, debtors took over French luxury brand Baccarat , known for its crystal, and its Chinese owner Fortune Fountain Capital who acquired it in 2017, went belly up.
In October 2021, Fosun Fashion was rebranded to give Lanvin Group an international appeal and recognition and expected the group to turn profitable by the second half of 2024 and triple its revenues to $1 billion by the end of 2025. It is largely depending on its success in China, where it is expecting a 400% increase in sales. But its year-on-year sales growth for the first six months was only 34% in the first half of 2022.
Like all the others, the growth is always expected to come from China, knowing it is also a very competitive market. For Lanvin, the problem is with the Chinese consumers who are unaware of the brand. And when they want to buy luxury products, they don’t recognize Lanvin although it has the quality and design.
With China accounted for 17% of luxury spending on personal goods and it is soon to become the largest luxury market by 2030 in according to Bain & Co.
Lanvin’s future has been affected by management issues and the long-term commitment by Fosun to the brand. Fosun bought Lanvin from a Chinese newspaper magnate Shaw-Lan Wang and Ralph Bartel, and between the two, they owned 75% and 25% of Arpège ASA, the holding company who owned the name “Lanvin” in 2018. As soon as they controlled the company, they fall out with Arpège ASA, without observing the contents of the contract and took everything in their hands.
Right now the SPAC deal is crucial and it is handled by Primavera Capital Acquisition Corporation for a vote on December 9, which was expected to raise up to $544 million for the Lanvin Group to expand its brand, especially in the U.S. and China market and potential acquisition. The existing shareholders are expected to hold 55% of the listed group after closing. But it was only able to raise $150 million, less than its expectation.
But it is also the concern that Fosun’s financial situation is not without trouble especially it is under a lot of pressure from every direction.
Some background about Fosun
Fosun International Limited was incorporated in 2004 in Hong Kong as a holding company. In July 2007, it was listed on the main board of the Stock Exchange of Hong Kong as SEHK:656.
From 2010 through 2015, Fosun spent billions buying foreign companies in healthcare, tourism, fashion and banking industries in the U.S. and Europe. Famous names like France’s Club Med, Britain’s Thomas Cook Group, Canada’s Cirque du Soleil, American clothing label St. John and Greek jeweler Folli Follie.
In July 2016, Fosun bought the English football club Wolvehampton Wanderers for an estimated £45 million.
In March 2020, it acquired a 55.4% of a French jewelry brand, Djula. In July of the same year, they entered into an agreement with a high-end Italian jewelry group to develop the Damiani and Salvini brand in China.
During the Covid period in 2020, Fosun Pharmaceuticals partnered with German biotech firm Biopharmaceutical New Technology to produce and distribute the Covid-19 mRNA vaccine BNT 162b2.
It also donated medical supplies and N95 respirator masks to hospitals in different countries to ease their situation.
(All pictures are from the courtesy of Lanvin’s website.)
