A Capital bets on B&O’s China growth story

Like many global retail companies, B&O has been exploring opportunities in China and other emerging markets in order to offset weak demand in the West. In the last 12 months, the company has acquired operations in Hong Kong and south China and opened a sales and marketing office in Shanghai. But the initiative barely makes a dent in B&O's financials: China accounts for less than 5% of total revenue, compared to 15-20% among many of the firm's global luxury peers.

"Strategic partnership makes a lot of sense in these cases," André Loesekrug-Pietri, chairman of A Capital, tells AVCJ. "Many European companies don't really need money. What they need is an answer to a strategic question: how to grow in emerging markets, especially in China?"

This explains why A Capital teamed up with Chinese luxury goods distributor Sparkle Roll to pay $30 million for a 7.71% stake in B&O. The private equity firm approached B&O late last year, arguing that the appropriate local strategic partner could secure the European company's breakthrough. Sparkle Roll has a track record that fits: a 15-year history distributing luxury brands such as the likes of Bentley, Rolls-Royce, Royal Asscher, Richard Mille and Parmigiani in China.

"For our fund, the value-added can only be maximized when we partner with a Chinese strategic investor , and focus on boosting top and bottom line, more than just providing financing," Loesekrug-Pietri adds. "For Sparkle Roll, it signals a rising status because they are now a co-owner of an international brand, moving up from beinga distributor."

The two investors have purchased roughly 3 million new shares in B&O at DKK60.22 apiece. On a fully diluted basis, A Capital and Sparkle Roll will own 1.59% and 6.12%, respectively, of the company. As part of the deal, Loesekrug-Pietri will join the company's board of directors and also become a member of its China advisory board.

The investment comes via the A Capital China Outbound Fund, which looks to take minority stakes in leading mid-sized European companies with strong potential in China, and brings in Chinese companies as co-investors.

The vehicle, with a target size of EUR250 million ($306 million), reached a first close in May. China Investment Corporation and Belgian Federal Holding Company are its anchor investors.

"The fund will have a hard cap target of EUR500 million, depending on market conditions," Loesekrug-Pietri says. "We will resume the second fundraising round in September and have already received significant interess from investors across the US, Asia and Europe."

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• Topics
• Greater China
• Consumer
• Expansion
• A Capital Asia
• China
• Consumer
• Growth capital