Challenged Clarks Inks Private Equity Deal with LionRock Capital
With Clarks’ business under significant pressure, LionRock Capital is giving the brand a lifeline.
In a deal that would end family ownership after 195 years, the Hong Kong-based private equity firm plans to acquire a majority stake in Clarks with an investment of 100 million pounds (or $129.9 million at current exchange). The Clark family, which still must approve the move next month, will remain a significant shareholder in the business.
“The investment from LionRock Capital and the restructuring of our retail footprint, combined with the ongoing support from our existing lenders and our focus on cash management and cost control, will provide funding for the company’s seasonal working capital needs and its transformation strategy,” said Clarks CFO Philip de Klerk in a statement.
LionRock Capital’s non-executive chairman is Li Ning, founder of namesake China-based sportswear giant Li Ning, which partnered last year with the firm to launch a private equity fund focused on consumer goods and sports.
“We believe our investment would create a stable platform for the company from which to manage through the unprecedented crisis, holistically restructure and transform the business and further expedite the brand’s growth globally going forward,” added LionRock Capital founder and managing director Daniel Tseung.
Over the summer, Clarks laid out the latest facets of its turnaround plan, which included significant job cuts, plus a focus on sustainability and digital growth as part its “Made to Last” strategy.
The brand placed an emphasis on areas like product innovation, design and quality, as well as digital upgrades to make the shopping experience more engaging for customers.
It also announced that it would cut roughly 900 corporate roles, while at the same time adding 200 different positions over the next year and a half.
Like many fashion players, the challenged brand was struggling with short-term liquidity needs due to the widespread closure of its brick-and-mortar fleet in response to the coronavirus pandemic.
“The challenges to our business brought on by COVID-19 have meant that we need more resources and investment in order to fully deliver this strategy and safeguard the future of our business,” Clarks CEO Giorgio Presca said today. “The new partnership with LionRock Capital will provide this, as well as the expertise to grow the Clarks brand in China, which remains a primary opportunity.”
Clarks is also seeking to address rent payments at its stores in the United Kingdom and in Ireland through a company voluntary arrangement (CVA), which de Klerk said was “launched out of absolute necessity.” (The LionRock investment is also subject to the CVA.)
“The proposal to creditors outlines a combination of a reduction of rent and a move to rebase Clarks’ rental cost base through a turnover-based model that aligns to future performance and reflects the wider retail market,” he shared. “As part of the CVA, we will move 60 of our 320 stores to nil rent. It is important to stress that we are not announcing the closure of any stores today, and employees and suppliers will continue to be paid.”
—With contributions from Tianwei Zhang
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