Deal focus: Navis to grow Texon outside the shoebox

When Texon International - a 70-year veteran of the shoe component supply industry - started looking for a new private equity partner, Navis Capital Partners was a natural fit. The Malaysia-based GP first got into the shoe business in 2005 with the purchase of Trimco International, which provided labels for sneakers by Nike and Adidas. Three years later Navis bought industrial boot company King's Safetywear, exiting the asset in late 2011 with a more than 4x return.

It was the Trimco investment, however, that was the most instrumental in lining up the recent Texon acquisition. Navis had sold Trimco in 2012, securing a 10x return. Just as important, the experience built up Navis' expertise in dealing with the exacting product quality expectations of a client that was a household name brand with a global reputation to keep.

Texon, like Trimco before it, counts footwear giant Adidas as a client, so the company was keen to engage with a PE firm familiar with this kind of relationship. "We didn't know them before, but they came to us and introduced the opportunity to us because they thought we would understand the business better," says Agnes Lee, a partner at Navis.

The GP has taken a controlling stake in Texon from Barclays Ventures for a sum understood to be in the region of $75-125 million, or on par with other investments from the $1.5 billion Navis Asia Fund VII. The capital is expected to push product rollouts in new Southeast Asian markets, including the industrial and medical sectors. Texon management will stay on after the transaction and hold a minority stake in the business.

Retention of current management - introduced by Barclays Bank in an early-2000s corporate recovery effort - was a key factor in the deal for Navis. Prior to this, the company had been hobbled to the brink of bankruptcy as a result of its time as a division of British United Shoe Machinery, a UK group that eventually collapsed due to unfunded pension liabilities.

The turnaround mounted under the Barclays rescue was dramatic and has been estimated to include an annual profit surge from GBP1.5 million ($2.1 million) to GPB100 million over the course of 20 months. During this period, Texon moved its headquarters to Hong Kong and consolidated its Chinese and Southeast Asian presence. The company today commands about a 30% market share in the premium shoe space and contributes to the production of more than 500 million pairs of shoes a year.

Bruno Seghin, a senior partner at Navis, expects this global relevance to be an important factor expanding Texon into new markets through complementary acquisitions, operational optimizations and practical marketing guidance for new products. "Because it's a global company, it's easier to do all those things," he says. "If a company is too local, even if you have a lot of ideas, you hit the wall - but we're not going to have that problem here."

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• Topics
• Greater China
• Industrials
• Support services
• Buyouts
• Buyout
• Hong Kong (China)
• Navis Management
• manufacturing