REFILE-UPDATE 1-Change Capital bids for Richemont's Lancel -sources

Wed Oct 16, 2013 3:10pm EDT

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By Astrid Wendlandt

PARIS Oct 16 (Reuters) - Swiss luxury group Richemont is informally looking for potential buyers for its fashion brand Chloe and received a non-binding offer this month from private equity firm Change Capital for leather goods maker Lancel, sources close to the matter said.

The disposals are part of Richemont's most important strategic turnaround in more than a decade as the world's second biggest luxury group focuses on its watch and jewellery brands, including Van Cleef & Arpels, Lange & Soehne and Cartier.

Richemont said earlier this year it would offload poorly performing businesses which analysts took as a sign the group was finally ready to sell brands such as Lancel.

Several sources close to Richemont said the group was also considering offloading watch brand Baume & Mercier.

Regarding the sale process of Chloe, for which advisers have not yet been retained, one of the sources said: "It is not a question of if but a question of when."

Several sources said Lancel would be a difficult brand for Richemont to sell and Change Capital Partners had made a bid because of its experience turning around businesses.

"Change Capital made a non-binding offer," one of the sources said. Change Capital and Lancel declined to comment.

Change Capital is a private equity firm set up by Luc Vandevelde, the former Carrefour and Marks & Spencer Chairman, which owns a majority stake in French ready-to-wear brand Paule Ka and previously invested in Jil Sander.

The sprawling Asian conglomerate Swire, the largest shareholder in airline Cathay Pacific and distributor of brands Repetto, Chevignon and Columbia in Hong Kong and mainland China, is looking to team up with a private equity firm to make a bid for Lancel, the sources added.

Swire would be keen to acquire a minority stake in Lancel to handle its distribution in Asia, the sources said. No-one at Swire could be reached for comment.

Earlier this year, Swire and French private equity firm Eurazeo bid for fashion brands Sandro, Maje and Claudie Pierlot, which were sold to KKR, valuing them at 650 million euros.

A number of private equity firms, including Permira, PAI Partners and Eurazeo, attended a presentation of Lancel last month but declined to make a bid after taking a close look at the company's books, the sources said.

Other interested parties sent information on Lancel but did not bid include private equity firm Apax as well as Fung Brands, the investment vehicle of Hong Kong billionaires Victor and William Fung that owns Sonia Rykiel, Cerruti and Delvaux.

The sources said they expected Lancel could fetch a valuation of about one time its annual sales while a separate source close one of the funds that declined to make an offer for the brand estimated that it would require an initial investment of at least 50 million euros to restructure the company.

Lancel's sale process follows the abrupt departure last spring of Marty Wikstrom who headed Richemont's fashion and accessories operations.

A spokesman for Richemont said Bernard Fornas, Cartier's ex-CEO and now the group's co-chief executive, was now in charge of the businesses but he declined to comment on the sale process.

Lancel made an operating loss of 10 million on revenue of 135 million euros in the year to end-June 2013, one person with first-hand knowledge of the matter said, adding that these numbers were pro forma, or retreated by the group for the sale.

Lancel, which has seen at least 10 chief executives since it was acquired by Richemont in 1997, suffers from a lack of clear market positioning and strategic direction, sources said.

The brand recently has had to destroy millions of euros worth of unsold bags and many of its shops abroad are losing money, the sources said. Richemont does not publish separate figures for its fashion and leather brands. (Reporting by Astrid Wendlandt, editing by Geert De Clercq and David Evans)

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