Primavera SPAC to merge with Fosun-owned fashion platform

Lanvin was established by Chinese conglomerate Fosun Group in 2017. It comprises five brands with a presence in more than 80 countries, six production facilities, 300 retail outlets, and 1,200 points of sale. The brands are French couture house Lanvin, skinwear specialist Wolford, Italian shoemaker Sergio Rossi, US luxury house St. John, and European menswear manufacturer Caruso.

Europe, the Middle East, and Africa – although chiefly Europe – account for nearly half of the company’s revenue. However, significant growth opportunities have been identified in North America and Asia. There is an expectation that Greater China’s share of sales will rise from 14% in 2021 to 28%, while overall revenue increases threefold to EUR 989m (USD 1.1bn).

The SPAC, Primavera Capital Acquisition Corporation (PCAC), raised USD 360m in early 2021 and said it would focus on global consumer companies with a significant China presence or compelling China potential. Opportunities were expected to arise from the economic fallout of COVID-19, with consumer businesses that were already facing challenges now under additional pressure.

The SPAC sponsor entity is controlled by Fred Hu, founder of Primavera, while PCAC was described as an affiliate of the private equity firm. Max Chen, a partner at Primavera, is CEO of the SPAC.

The SPAC shareholders and sponsor will together own 28% of the merged entity. The sponsor typically receives a 20% interest in the SPAC – not the merged entity – for a nominal sum post-listing. Forward purchase agreement (FPA) and PIPE investors, which made equity contributions of USD 90m and USD 50m, respectively, will hold 5% and 3%.

Most of the USD 1.92bn in overall equity is from Fosun and Lanvin’s management team, which are rolling over their interests. They will own 65% of the merged entity, of which approximately 6% have been earmarked for an employee stakeholder ownership program (ESOP).

The FPA and PIPE investors include Fosun International, Itochu Corporation, Chinese footwear manufacturer Stella International, an entity tied to e-commerce solutions provider Baozun, textiles supplier Golden A&A, Aspex Management, and Sky Venture Partners.

The transaction, which values the company at 2.7x projected revenue for 2022, will create balance sheet cash of USD 509m, according to a presentation. It still needs to be approved by a majority of SPAC investors. On completion, they can exercise their warrants and purchase shares or redeem some or all their shares for cash.

“In Lanvin Group, we see a unique global business with a rich heritage, an entrepreneurial management team, and a differentiated strategy to build a luxury powerhouse for a new generation of consumers, especially benefiting from surging luxury consumption in Asia,” Chen said in a statement. “Lanvin Group and Primavera share the same vision of nurturing and reinvigorating world-class luxury brands.”

Lanvin’s estimated revenue for 2021 was EUR 333m, up from EUR 270m the previous year. Over the same period, EBITDA remained in negative territory, although the loss narrowed from EUR 130m to EUR 85m. The company projects revenue of EUR 473m in 2022, EUR 808m in 2024, and EUR 989m in 2025. EBITDA is expected to turn positive in 2024 and reach EUR 85m in 2025.

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• Topics
• Greater China
• Consumer
• IPO
• China
• Europe
• Primavera
• SPAC
• Fosun Group