Ruyi Group Fell Into Acquisition Trap

Products / lianshang.com & soupu.com

Written by Li se

A dream of "fashion empire" in ten years, should Ruyi group wake up?

On the official website of Ruyi group, the latest news is still on December 15, 2020. On this day, Ruyi group released the "Shandong Ruyi science and Technology Group Co., Ltd. notes on the maturity and repayment of bonds". Ruyi group pointed out that since last year (2019), due to the impact of centralized repayment of its own debt and limited financing cycle, Ruyi group has made great efforts to improve the efficiency of the project, Liquidity pressure of the company; In addition, due to the outbreak of new coronavirus this year, the company's production, sales and other business activities were seriously affected. In the first half of the year, the operating income and cash flow decreased significantly, which aggravated the liquidity tension, resulting in the company's failure to cash the medium bill due on December 14, 2020. ?

By 2022, the debt problem of Ruyi group has not been solved, and it has become an important factor of Ruyi group's "collapse of human facilities". ?

According to media reports, Ruyi group's current debt exceeds 40 billion yuan. As of the closing date on February 25, 2022, Ruyi group's market value is only 1.536 billion yuan. From being praised as "Chinese version of LVMH" to deep debt crisis, Ruyi group represents the transformation and dilemma of traditional manufacturing enterprise transformation. ?

01、 Ten years of "buying" fashion empire

In 2007, Ruyi of Shandong Province was officially listed. Three years later, Qiu Yafu, the helmsman, opened the road of "buy buy buy", and through acquisition, Ruyi group was shaped into "Chinese version LVMH". ?

In 2010, Ruyi group took the first step of acquisition. For the first acquisition, Ruyi group chose Rena of Japan. Ruyi group won 23 famous brands of Rena and became the largest shareholder of Rena with 41.53% equity advantage. ?

Since then, Ruyi group has gone further and faster on the road of "buy, buy, buy". ?

In 2012, it acquired 70% equity of Yeon Seung apparel group, a Korean clothing enterprise

In 2014, it became a shareholder in peine Gruppe, a German men's clothing manufacturer

In 2016, it obtained 53% equity of SMCP group

In 2017, it acquired libon holdings, aquascutum, a British windbreaker brand, and Bagir, an Israeli men's wear group

In 2018, it intends to acquire Bally, a Swiss luxury brand

In 2019, it completed three-year acquisition of INVISTA's three brands According to incomplete statistics of lianshang.com, the total cost of these acquisitions exceeded 35 billion yuan. If Shandong Ruyi is listed as a whole, it will be ranked in the top 20 of global fashion and luxury goods groups, ranking No. 16 (in terms of sales revenue), according to the data from the terminal of the company quoted by the news agency. ?

Reflected in the data of Ruyi group's listed companies, its revenue also increased from 510 million yuan in 2010 to 1328 million yuan in 2018, and its net profit also increased from 45 million yuan in 2010 to nearly 100 million yuan. It called Ruyi "China's LVMH" and even commented that "Chinese people are not only buying luxury goods, but also buying companies that produce luxury goods.". ?

Qiu Yafu explained his buying spree: "the best way for China's clothing industry to catch up with the international level is to make use of international fashion resources through the power of capital. If you want to know how to do a good fashion brand, you must find the source of fashion, so Ruyi has made a series of mergers and acquisitions in France, Italy, Britain and Japan."

Behind the merger and acquisition, Ruyi group wants to extend its tentacles from manufacturing to clothing brands. ?

At that time, Shandong Ruyi planned to launch a high-end fashion brand named "Ruyi" in October 2019, focusing on the Paris and Milan markets. ?

Qiu Yafu seems to think that if he has mastered the right of brand discourse, he will master the core secret of brand development. However, the source of fashion and international fashion resources have not been used. The "fashion empire" is still under construction, "empire collapse" and debt crisis are approaching. ?

02、 A dream is broken ?

In 2019, the debt cloud will cover Ruyi group.

Cesar Araujo, calvex CEO of Portugal, stressed to the media that Shandong Ruyi had stopped paying bills in March 2019 and owed about 182000 euros.

On December 11, 2019, Moody's, the world credit rating company, downgraded Ruyi's corporate family rating from B3 to caa1, and changed its outlook to negative, because it was worried about the increased risk of refinancing in view of its huge debts due soon.

Next, supplier debt collection is accompanied by the development of Ruyi group in recent two years. ?

Renown, a clothing group, publicly said it had suffered consecutive annual losses because it was unable to raise y5.3 billion in outstanding debt from Shandong Ruyi. It is reported that in 2020, Renna's debt amount was as high as 130 million US dollars (about 870 million yuan). In May 2020, it applied for the application of the civil regeneration law. However, no sponsor company was found to take over the whole company, so it had to start bankruptcy proceedings instead. In August, Rena has decided to sell major brands such as "d'urban" for men's wear and "aquascutum", a high-end brand originated in the UK, to other companies in the same industry. As for the "Arnold Palmer timeless" brand stores that have not been found for sale, they have all been closed before the end of October. ?

Also going bankrupt in 2020 is Bagir, which Ruyi group bought in 2017. It is reported that Bagir announced in February 2020 that it would take legal action to deal with Ruyi's breach of contract. In November 2017, Shandong Ruyi announced the acquisition of majority shares of Bagir group, and the whole transaction was originally planned to be completed in 2018. However, because Shandong Ruyi has not paid Bagir the remaining $10 million for the acquisition, the deal has not yet been completed. ?

More than two years after the announcement of Bally's acquisition, Ruyi group's commitment of $600 million in financing has not yet arrived. ?

Bankruptcy and sale become the "key words" of Ruyi group. ?

Gieves & Hawkes, a British men's wear brand owned by lippon group, is facing bankruptcy. And libon group also failed to repay the loan of US $150 million on time, which was applied by Standard Chartered Bank to the court for liquidation. ?

As for the most profitable SMCP group, Ruyi group was also kicked out of the board of directors because its indirect holding company, European topsoho s à RL, failed to redeem 250 million euro bonds convertible into SMCP group shares at maturity. Qiu Yafu and other five people were kicked out of the board of directors. ?

The latest report is also inseparable from the consequences of default. ?

Creditors of Shandong Ruyi technology group said they would seek control of the elastic fabric manufacturer after Ruyi defaulted on a $400 million loan to buy Lycra in early 2019.

On Ruyi group's official website, only SMCP group and aquascutum are on its fashion page, while other acquired brands have disappeared.

Although the page still has a striking "restructuring fashion map", Ruyi group's "fashion empire" has been crumbling. ?

03、 Dyspepsia

A large number of "buy buy buy" have hollowed out Ruyi group's "family background" and buried a series of hidden worries for the "thunder storm" behind it. However, this is not the only reason. In fact, how to operate after the acquisition has also troubled Ruyi group. ?

Take Ruina group as an example. In 2011, Shandong Ruyi and Ruina set up a joint venture in China, hoping to open 1000 stores in China within 10 years. But in 2014, the joint venture was stopped, and by this time, the number of stores in real operation was less than 100. In 2016, renown began to provide "d'urban" suit customization service, and stopped service in 2019 due to unsatisfactory performance.

Wang Guoping, a member of Lianshang senior consultant group, pointed out: "the factory is engaged in b-end, batch business; luxury goods are in C-end with limited business. The logic of the factory is to maximize the production capacity and achieve the highest efficiency; C-end customers want me to have you or not, it's better to be close to customization. The factory pays attention to good fabric quality, and the brand pays attention to aesthetic feeling and aura." ?

Ruyi group does not seem to have a complete grasp of the brand's operating secrets. ?

Some media pointed out that, taking gieves & Hawkes of libon group as an example, this brand is a British Royal authorized men's wear brand, which has been on the high-end line. However, after being acquired, it has been put into various "outlets" - discount shopping centers for selling off-season, off shelf and broken code products. ?

Lianshang.com consultant Li Ling pointed out: "it's easy to buy, it's difficult to manage! It's easy to know famous brands, but it's difficult to understand famous brands! The management of these brands has already had problems, and the development has encountered bottlenecks. If you buy them foolishly, the result of destroying these brands is of course."

In fact, there is a basis for such a judgment. When Ruina was acquired by Shandong Ruyi, it had lost money for four consecutive quarters; In the year before the acquisition, lippon's financial position was a huge loss of HK $441 million

To revive these brands, at least a large amount of capital injection is needed. On the one hand, "capital injection" is used to put out the fire, and on the other hand, "buy and buy". It is no wonder Ruyi group has "indigestion". ?

What's more, the success of luxury brands is not limited to channel layout, especially for striving for generation Z. influential marketing events have become the key to brand "out of the circle". What impresses people most about Ruyi group's last Marketing out of the circle is the "Great Wall show" in 2000. ?

For the acquired brands, Ruyi group's help is more limited to helping them enter tmall, Jingdong and open offline stores, but not helping them to take root in the Chinese market.

Coupled with the impact of the new crown "black swan", Ruyi group, whose capital chain is broken, has been unable to bring the brand back to life. Therefore, it is not surprising that bankruptcy liquidation will be carried out.