China-linked EcarX, Lanvin complete SPAC mergers

Both are now trading below their SPAC offering prices of USD 10.00, following shareholder redemptions. EcarX slipped to USD 6.35 on its December 21 debut before rallying to close at USD 10.75. It ended December 23 at USD 8.23 with a market capitalisation of USD 3bn. Lanvin began trading on December 16 and has fallen to USD 4.51. Its market capitalisation is USD 590m.

EcarX was founded in 2017 by Eric Li, who is also founder and chairman of Geely, and Ziyu Shen, who previously worked on the General Motors internet-of-vehicles OnStar project in China. The company received nearly USD 250m in private equity funding from the likes of Baidu, SIG China, the VC unit of China Reform Fund, and US automotive technology player Luminar.

EcarX claims to be shaping interaction between people and cars through a smart mobility product line that includes infotainment head units (IHU), digital cockpits, and vehicle chip-set solutions, as well as a core operating system and integrated software stack. It is also developing a full-stack automotive computing platform. Its technology has been integrated into over 3.7m vehicles.

In 2021, the company generated USD 436m in revenue, USD 128m in gross profit, and negative adjusted EBITDA of USD 128m. Revenue and gross profit are estimated to reach USD 567m and USD 176m in 2022, while the loss in EBITDA terms widens to USD 170m. EBITDA is not expected to turn positive until 2024, by which point revenue and gross profit will be USD 1.38bn and USD 479m, an investor presentation stated.

Cova Acquisition Corp, a SPAC established by Jun Hong Heng, founder and CIO of credit investor Crescent Cove Advisors, and K.V. Dhillon, head of business development at Crescent Cove and formerly head of Guggenheim Capital Management Asia, agreed to merge with EcarX in May at a value of USD 3.4bn.

Existing investors rolled over USD 3.4bn in equity for a planned 89.01% stake in the merged entity, while SPAC investors contributed USD 300m – approximately equal to EcarX’s intended balance sheet cash – for 7.85%. Owners of the SPAC sponsor, which received a 20% interest in the SPAC on listing for a nominal fee, would take 1.96%. The rest was earmarked for other investors.

“The global automotive industry is experiencing the fastest transformation in its history and EcarX is uniquely positioned to continue capturing share within this rapidly growing market,” Shen, who serves as the company’s CEO, said in a statement.

“The solid foundation we have built over the last five years strongly positions us for future growth, both expanding our relationship with existing partners and reaching new global brands as we expand internationally.”

Lanvin’s merger with Primavera Capital Acquisition Corporation (PCAC), a SPAC with ties to China-based private equity firm Primavera Capital Group, was agreed upon in March. 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 transaction gave Lanvin a pro forma enterprise value of USD 1.5bn and a pre-money equity valuation of USD 1.25bn. Most of the USD 1.79bn in overall equity came from Fosun and Lanvin’s management team, which rolled over their interests. Forward purchase agreement (FPA) and PIPE investors committed USD 90m and USD 50m, respectively.

However, in November, the pro forma enterprise valuation and pre-money equity value were downsized to USD 1.3bn and USD 1bn, according to an investor presentation.

The USD 1.68bn in overall equity comprised USD 1bn in rollover equity, USD 414m from the SPAC shareholders and sponsor, USD 145m from PIPE investors, USD 80m in FPA, and a USD 50m private placement made to Meritz Securities. The increase in the size of the PIPE commitment reflected the conversion of existing shareholder loans.

Fosun and Lavin's management were set to own 55% of the company, with 29% going to the SPAC shareholders and sponsor, 8% to PIPE investors, 5% to FPA investors, and 3% to Meritz.

Lanvin, which was formed by Fosun in 2017, 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).

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.

“We are confident the group will further develop its fast-growing global business to become a unique global luxury powerhouse by leveraging the rich heritage of its brand portfolio and its differentiated business strategy,” Chen said in a statement.

“We look forward to working together with the management team to support the growth of the company's top-class luxury brands and create long-term value for shareholders."

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• Topics
• Greater China
• IPO
• Technology
• Consumer
• China
• automobiles
• Fosun Group
• Primavera
• SPAC
• SIG
• Baidu