KKR makes 2x return on fashion brand sale

KKR’s sale of SMCP, which it acquired in 2013, to Chinese textile manufacturer Shandong Ruyi generated an IRR of over 20% and a 2x money-on-money return.

KKR is selling a controlling stake in French fashion brands Sandro, Maje and Claudie Pierlot, together known as SMCP Group, to Chinese textile manufacturer Shandong Ruyi Technology Group.

The transaction could involve SMCP’s founders and management reinvesting in the company as minority shareholders. KKR is keeping a minority interest in the company, according to a statement. Shandong Ruyi will support SMCP’s global expansion and retain SMCP’s design and creative teams in Paris.

Shandong Ruyi chairman Yafu Qiu said in the statement this would support Shandong Ruyi’s quest to develop a fully-integrated textiles and fashion business in China and globally.

The investment has generated an internal rate of return of over 20 percent and a 2x money-on-money multiple for KKR, a source close to the matter told Private Equity International.

KKR made its original investment in SMCP in 2013 via KKR European Fund III, the source said. That fund was raised in 2009 with $6.79 billion in capital, above its $6 billion target, according to PEI Research & Analytics. Its investor base includes the California Public Employees’ Retirement System, which committed $327.74 million, Oregon Public Employees’ Retirement System, which committed $412.1 million, Oregon State Treasury, which committed $412.1 million, and Washington State Investment Board, which committed $606 million, according to PEI Research. Its IRR was 10.1 percent as of 30 September, according to Oregon Public Employees Retirement Fund.

KKR acquired 65 percent of SMCP, with SMCP management keeping about 35 percent, according to KKR.

Bank of America Merrill Lynch and UBS were financial advisors to KKR and SMCP. Bredin Prat was the legal advisor to KKR. JPMorgan was the exclusive financial advisor to Shandong Ruyi and sole underwriter of associated debt transaction financing, and Latham & Watkins was legal advisor to Shandong Ruyi.

Shandong Ruyi operates 13 industrial parks in China and has a distribution and point of sales network across six continents. SMCP has 1,118 point of sales in 33 countries.

KKR manages $119.54 billion in assets, according to PEI Research.