March 8, 2016 / 10:16 AM / 3 years ago

Fashion group SMCP plots IPO as Chinese deal hopes fade

PARIS/LONDON (Reuters) - SMCP, the French company behind fashion brands Sandro, Maje and Claudie Pierlot, is aiming to list shares in Paris by the summer after buyout talks with Chinese textile group Shandong Ruyi failed to come to fruition, sources told Reuters.

Daniel Lalonde, President and CEO of SMCP (Sandro, Maje, Claudie Pierlot), poses at the company headquarters in Paris, France, October 9, 2015. REUTERS/Philippe Wojazer

SMCP, controlled by private equity firm KKR (KKR.N), unveiled plans for an initial public offering on Tuesday, market conditions permitting. Sources said it was aimed for a valuation of more than 1 billion euros ($1.10 billion).

Sandro, Maje and Claudie Pierlot, which sell dresses priced at around 200 euros, operate in what is classified as the accessible segment of the luxury market. That sector has been benefiting from buoyant demand among fast-growing middle classes, particularly in countries such as China.

Last year, SMCP made earnings before interest, tax, depreciation and amortization (EBITDA) of 107 million euros on revenue of 675 million euros, up 33 percent and 11 percent, excluding the boost from new stores.

Chief Executive Daniel Lalonde said the deal would include a capital increase of 150-175 million euros. Proceeds from the primary offering would help pay down the company’s high yield debt of 290 million euros, he added.

CHINA TRAIL GOES COLD

Talks with Chinese group Shandong Ruyi have been going on since last year but failed to produce a deal, partly due to price differences and disagreements over how much the founding family should sell, sources close to the talks have said.

According to the registration document, founders Evelyne and Ylan Chetrite and Judith Milgrom together own 21.11 percent of the company and 14.57 percent of the voting rights. KKR owns 69.75 percent of the capital and 78.83 percent of voting rights.

If SMCP achieved an enterprise value of just above 1 billion euros, it would put it on a multiple to EBITDA of around 10-11 times, in line with U.S. rival Kate Spade KATE.N.

However, Kate Spade commands a market valuation of more than $3 billion and its business is more skewed towards leather goods than SMCP which is more based on apparel. Another comparative could be London-listed Ted Baker (TED.L) which is trading on 17 times EBITDA.

Sources told Reuters last October that KKR had hired Bank of America Merrill Lynch and UBS to review options for SMCP including an IPO.

A deal with Shandong Ruyi is still not completely off the table, the sources said. “Both tracks will remain active until the end,” one of the sources said.

But another said: “Unless someone comes in with a very nice price, it’s an IPO.”

KKR acquired control of SMCP in 2013 in a deal that valued it at around 650 million euros.

SMCP plans to expand outside of France, where it makes just under half of its sales, particularly in China, the U.S., Britain, Spain and Italy. It also wants to develop digital sales, menswear and strengthen its leather goods offering.

SMCP expects sales to continue rising in double-digit terms this year and over 2015-2018, it has compound average growth rate target of 11-13 percent.

As of last year, the company had 1,118 points of sale for its three brands.

Additional reporting by James Regan and Pascale Denis; Editing by Keith Weir

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