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Clarks Might Have a New Owner: Next Stop, China?

One of the U.K.’s most iconic footwear retailers looks like it may soon be under new management.

If a deal is approved, Clarks is set to have new majority ownership in the form of a China-based sports event production and management company, Viva China Holdings Limited. As part of the transaction, Viva China would not directly acquire Clarks—rather it is paying 51 million pounds ($69.7 million) for 51 per cent of LionRock Capital Partners QiLe Limited, the private equity firm which has scooped up the British brand.

No definitive agreement between Viva China and LionRock has been reached.

In December, Clarks’ shareholders voted to allow the struggling footwear retailer, manufacturer and wholesaler to be taken over by LionRock Capital, a move that ensured that all 320 of its remaining stores would survive. Under a company voluntary arrangement (CVA) approved by Clarks’ creditors, 60 of its stores will pay no rent, while rent will be sales-based at the remaining 260.

LionRock is presently in the process of completing its 100-million-pound ($129.9 million at the time of the acquisition) investment to recapitalize Clarks as part of its rescue of the ailing brand. Clarks said that the cash infusion would position the business for future long-term sustainable growth.

The private equity fund typically partners with leading global consumer brands with an emphasis on China expansion, so it appears the next step of Clarks’ growth could be taking place in that region. Clarks CEO Giorgio Presca floated that sentiment late last year.

“The challenges to our business brought on by Covid-19 have meant that we need more resources and investment to fully deliver [Clarks’] strategy and safeguard the future of our business,” said Presca in a November statement. “The new partnership with LionRock will provide this as well as the expertise to grow the Clarks brand in China, which remains a primary opportunity.”

Clarks already was in poor shape prior to the pandemic, with the company experiencing $106 million in losses in 2019. But the company began making massive cuts earlier in 2020 as it sought to stave off administration, the U.K.’s version of Chapter 11 bankruptcy in the U.S. In April, Clarks had as many as 1,400 locations across 75 countries. One month later, Clarks announced plans to cut approximately 900 corporate jobs worldwide with more than 100 jobs dissolving at the company’s headquarters in Somerset, England. The company noted, however, that approximately 200 new roles will be created.

Clarks isn’t the only U.K. retailer that has turned to insolvency measures to avoid complete collapse, with Arcadia Group and Debenhams now serving as the latest of the country’s major merchants hoping to find a buyer that can revive their businesses in a smaller form. Edinburgh Woollen Mill and Jaeger are two recent retailers that fell into administration, but were acquired to be revived, with the latter set to be sold on the Marks & Spencer website.

The U.K. is now in its third national lockdown, making matters for nonessential retailers operating in the market even worse. With that in mind, Clarks may need to be more focused on its international presence.

The pandemic has impacted Clarks in other ways as well, with the company recently scrapping its popular free replacement school shoes program due to the temporary closure of its stores. The footwear retailer rolled out the program to shoppers before the back-to-school rush in July last year, guaranteeing parents that their kids’ school shoes would fit until next year. Shoppers could exchange their children’s shoes for free if they no longer fit by Nov. 20 for sizes 7 through 9.5, and by Feb. 20 for those sized 10 and above.

Clarks decided to replace the offer with a new promotion, noting that if customers purchased any type of school shoes in a Clarks store between July and September 2020, they could to get a 30 percent discount off their next pair of shoes. Shoppers will only be able to use the code for online purchases, and have until March 31 to use the discount.

LionRock said the founding Clark family would remain key shareholders in the business. This is the first time in the company’s 194-year history that an outsider would hold majority control. Prior to the acquisition, the founding family’s stake in the business was believed to be in the 80 to 85 percent range.

Viva China Holdings was founded by Chinese gymnast-turned-entrepreneur Li Ning in 2009. In May, the company bought a 66.6 percent controlling share of Hong Kong clothing chain Bossini International Holdings for $6 million.

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