Qiu Yafu, chairman and owner of the Shandong-based company Shandong Ruyi, has invested more than $3 billion (about 20 billion yuan) in the acquisition of luxury garment companies from Paris to London, including French fashion brands Sandro and Maje, British trenchcoat brand Aquascutum, and Lycra manufacturers. His dream was to become the Chinese version of luxury goods giant LVMH.
On September 16, wealthy businessman in China, Liu Qiangdong, also announced the latest news that JD Health and JD Logistics will continue to have connected transactions. To increase governance effectiveness, Chairman Liu Qiangdong transferred 45% of his shares holds in Xi’an JD.com and Suqian Tianning to Miao Qin, the Group’s vice president.
$3 billion investment of “China’s LVMH” collapsed
In 2016, China’s increasingly affluent shoppers are flocking to European luxury goods, and Shandong Ruyi Group started sales.
After purchasing a controlling stake in the French fashion company SMCP SA from KKR & Co. in 2016, Ruyi has assisted in the network’s expansion to more than 100 outlets in glitzy malls in developing cities like Shanghai and Beijing.
In 2017, SMCP was listed on the Paris Stock Exchange, a success that gave Ruyi the confidence to make more acquisitions.
In 2018, Qiu Yafu went public with his goal to make Ruyi the LVMH of China, which some listeners interpreted to mean maximizing the advantageous trading environment. His target was a Chinese version of the luxury giant “LVMH.”
Quickly, Qiu became known as a savvy businessman. An investor who visited the company’s headquarters at the time recalled being struck by the opulent design, which he would have expected more in a major global city than in a lesser-known provincial city in eastern China. Executives elaborate on their global plans.
But that ambition is not enough to revive brands whose stars have begun to wane. Shandong Ruyi is losing control of important businesses and is in dispute with creditors.
For Ruyi, creditors soon called. Standard Chartered Plc filed a lawsuit in December 2020 against Trinity Ltd., a Ruyi unit that owns several brands, including Gieves & Hawkes.
Richard Hyman, a partner at Thought Provoking Consulting, revealed that Ruyi was having trouble because of increasing expenses and the stagnating market. He added that it requires careful preparation, cash, and time to revive businesses like Aquascutum, which peaked many years ago.
In June, lenders took over the spandex manufacturer Lycra, which Ruyi bought from the billionaire Koch brothers. In July, the private tailor store Gieves & Hawkes was sold to liquidators from Nu Skin company. In the upcoming months, a court may decide the additional assets’ fate.
Last year, a trustee who took a large stake in SMCP on behalf of creditors and confronted Ruyi in trials in the UK, Luxembourg, France, and Singapore.
Among other things, it is seeking to open bankruptcy proceedings against the vehicle that holds Ruyi’s stake in the SMCP. It appealed after its first attempt was rejected by the Luxembourg Commercial Court and is expecting a ruling later this year, according to a person with knowledge of the matter.
For its part, Ruyi argued in UK court filings that Carlyle worked to force it into a position where it could gain control of SMCP stock. In May, a judge denied Ruyi’s request to seek documents they wanted to pursue claims against Carlyle.
Representatives for Anchorage, BlackRock, Carlyle, Ruyi, SMCP, and the bond trustee, Glas SAS, also declined to comment on the court cases.
Are wealthiest change with Liu Qiangdong’s share change?
On September 16, the chairman of Jingdong group, Liu Qiangdong, announced to pass on to the Vice Chairman, Miao Qin, his 45% stakes in Xi’an Jingdong and Suqian Tianning to increase governance efficiency.
According to the new contract agreement, Miao Qin, Li Yayun, and Zhang Yu are the newly registered shareholders of Xi’an Jingdong, with ownership rates of 45%, 30%, and 25%, respectively.
Jingdong Logistics’ stock price dropped more than 6% on September 20 thanks to Liu’s move. Some investors believe the aforementioned share transfer represents a decrease in Liu Qiangdong or Jingdong’s ownership of Jingdong Logistics, although that may not be the case.
According to Nomura, a Japanese finance company, following the announcement, Liu Qiangdong will continue to serve as chairman of Jingdong Health and Jingdong Logistics, and Jingdong Group will continue to be the largest shareholder of these two businesses.