LionRock Capital Takes Majority Stake in Troubled Clarks
Clarks’ business is under significant pressure, and LionRock Capital is giving it a lifeline.
In a deal that would end family ownership of the British footwear brand after 195 years, the Hong Kong-based private equity firm said it plans to acquire a majority stake in Clarks with an investment of 100 million pounds.
The Clark family, which still has to approve the move next month, will remain a “significant” shareholder in the business, according to a joint statement from Clarks and LionRock Capital.
“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 chief financial officer Philip de Klerk in a statement.
LionRock Capital founder and managing director Daniel Tseung added, “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.”
The current non-executive chairman of LionRock Capital is the founder of Chinese sportswear giant Li Ning, whose namesake company partnered with LionRock Capital last year to set up an investment fund. The partners are looking to acquire clothing, footwear, accessories, food and beverage brands that have growth potential in China.
In May, 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.
Clarks made 160 redundancies across its global offices, including 108 in its headquarters in Somerset, England. Up to 700 more positions were set to be eliminated in the next 18 months. At the time, Clarks said it planned to add 200 different positions over the next year and a half.
Like many fashion players with vast retail networks in the U.K. and the U.S., the brand was struggling with short-term liquidity needs due to the widespread closure of its brick-and-mortar stores 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,” said Clarks chief executive officer Giorgio Presca.
“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 U.K. and in Ireland through a company voluntary arrangement, which de Klerk said was “launched out of absolute necessity.” The LionRock investment is subject to the CVA, which is a type of insolvency procedure that allows a troubled company to hammer out debt solutions with its creditors.
“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 said.
“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.”
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