China's investment behemoth buys Austrian lingerie brand Wolford

Mar. 5 (NBD) - Luxury Austrian lingerie brand Wolford announced that its major shareholders have agreed to sell a 50.87 percent stake to a unit of Chinese conglomerate Fosun International Holdings (Fosun), for 32.56 million euros (39.7 million U.S. dollars).

After the deal is closed, Fosun will become the largest shareholder of Wolford.

Fosun has been very active in the international market lately. On Feb 22, Fosun and its subsidiary announced acquisition of the oldest French fashion house Jeanne Lanvin SAS. On Feb 26, it bought a Brazilian brokerage and wealth management firm Guide Investimentos S.A. for RS$170 million (52.3 million U.S. dollars).

Fosun’s chairman said in an interview in Paris on Tuesday that the company is looking carefully at [doing deals] in the healthcare, education, fashion and tourism sectors, Financial Times reported. 

Wolford to issue new shares

According to company filings of Wolford, the company has signed an acquisition agreement with Fosun last Thursday.

Wolford is set to issue 1.72 million new shares, expanding its registered capital from 36.35 million euros (44.4 million U.S. dolalrs) to 48.85 million euro (59.7 million U.S. dollars). To reinforce Wolford's financial structure, Fosun will also provide up to 22 million euros (26.9 million U.S. dollars) as part of the fresh capital increase. 

After authorities approve the acquisition, Wolford is expected to hold a shareholder meeting to discuss the capital increase issue in May this year, cited the company filings.

To be in line with Austrian's law, Fosun has to take a mandatory bid for the remaining shares of Wolford. Price of each share is equivalent to the weighted average share price of 13.67 euros (16.7 U.S. dollars) over the the past 6 month, higher than the acquisition price of 12.8 euros (15.6 U.S. dollars) per share.

Wolford engages in high-end female underwear, best known for its lingerie and legwear. However, the company has operated at a loss for several consecutive years. Data shows that the operating revenue of Wolford increased 4 percent year on year to 70.15 million euros (85.7 million U.S. dollars) during May to October of 2017, while the net loss (after-tax) stands at 6.62 million euros (8.1 million U.S. dollars).

Wolford CEO Axel Dreher said the company welcomes the entry of a financially strong core shareholder which is experienced in the luxury sector.

Fosun's capital increase is helpful in adding wolford's capital base in the long run and improve liquidity, noted Wolford CFO Brigitte Kurz.

Fosun to further expand lingerie market

In fact, Fosun has long been seeking for acquisition of luxury lingerie brands. Reuters reported last December that Italy’s La Perla has agreed to one-month exclusive talks with the investment behemoth over the sale of a majority stake in the luxury lingerie group. However, Fosun didn't respond to NBD's request for confirmation on this matter.

Wolford is the second lingerie brand that Fosun has acquired. Fosun bought 240 million newly-issued shares of China's largest lingerie brand Cosmo Lady last May, accounting for 11.2 percent of its enlarged capital.

Data of consultancy firm Oliver Wyman showed that the global underwear market will reach 35 billion U.S. dollars and keep a 4 percent increase rate in the following 4 years. At the same time, sales of foreign underwear brands which have only a 20 percent penetration rate in Asia will embrace a growth rate of 8 percent annually.

Cheng Weixiong, general director of a shanghai-based brand management company, said underwear sector, a niche market, hasn't got enough attention in China. But as the consumption upgrades, demands for high-end lingerie will explode. Chinese companies know better about Chinese market, thus foreign lingerie brands decide to join forces with local partners.

Since Chinese underwear market hasn't seen a dominate giant so far, capitales are needed to realign and integrate the market resources. By investing in popular brands like Cosmo Lady and other luxury lingerie brands, Fosun is set to build a well-round lingerie industry chain, Cheng noted.