HK’s LionRock to buy majority stake in UK footwear brand Clarks for $130m

Photo: Bree Bigelow/ Unsplash

Hong Kong-based private equity firm LionRock Capital has inked an agreement to invest 100 million pounds ($129.7 million) in C&J Clark Limited (Clarks), one of UK’s oldest footwear brands, for a majority stake in the company, the investor announced on Wednesday.

The investment will enable Clarks, a 195-year-old British footwear brand with a presence in over 100 markets worldwide, to “position the business for future long-term sustainable growth” and to leverage LionRock Capital’s resources to further grow globally, and most notably in China and the rest of Asia Pacific, said the investor.

If the proposed investment is approved in a shareholders’ vote in December, LionRock Capital will become a majority shareholder, while the Clark family will remain an investor.

The deal is also subject to a Company Voluntary Agreement (CVA) for Clarks’ businesses in the UK and Ireland in relation to its store portfolio.

The CVA is an administration under UK insolvency law that allows an indebted or insolvent company to reach a voluntary agreement with creditors regarding repayment of its corporate debt over an agreed period of time. In Clarks’ case, the landlords of the firm’s stores will have to accept a proportion of their store’s revenue as rent instead of a fixed lease.

The CVA is being launched out of “absolute necessity” in order to address the permanent shift in structural shopping behaviour as a result of the COVID-19 pandemic, said Philip de Klerk, interim CFO at Clarks, in a statement.

“Like many businesses in our sector, the impact of the COVID-19 pandemic and the current economic uncertainty has created a tough retail environment,” said Klerk. He said that the investment from LionRock Capital and the firm’s “focus on cash management and cost control” will provide capital for its “seasonal working capital needs and its transformation strategy.”

He said that the firm plans to move 60 of its 320 stores in the UK to nil rent. It has not shut down any store so far.

COVID-intensified capital pressure

Somerset-based Clarks was founded in 1825 by brothers James and Cyrus Clark, and has since been controlled by the Clark family. The firm operates retail, wholesale, franchise, and online channels worldwide supported by nearly 10,000 employees.

Britain’s Sky News first reported in late September that LionRock Capital and investment firm Alteri Investors were two remaining bidders for the debt-ridden UK footwear manufacturer and retailer that has been looking for a share sale to re-position the business and weather the pandemic’s impact on high street.

“The retail trading environment in the UK has been under pressure for some time. Clarks’s UK business has been faced with weaker consumer confidence and reduced footfall. In the midst of Clarks undertaking its transformation plan, COVID-19 exacerbated these challenges, with working capital and turnover significantly impacted, placing acute liquidity pressure on the group,” said Gavin Maher, partner at Deloitte.

“The turnover rent model better aligns the risk and reward of trading during these uncertain times and the CVA, together with the proposed investment from LionRock, provides a stable platform upon which the management’s transformation strategy can be delivered,” said Maher.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.