Shandong Ruyi: Debt Pressure, Slow Down The "Buy Buy Buy" Pace

Founded in 1972, Shandong Ruyi Technology Group (hereinafter referred to as "Shandong Ruyi") started in textile manufacturing. In recent years, it has been expanding through international acquisitions. Its total valuation has ranked the top among Chinese garment enterprises. Currently, it has four listed apparel companies, including Ruyi group, Hongkong Li Bang holding group, French fashion group SMCP, and Japanese clothing company Renown.

Shandong Ruyi announced in 2018 that it will slow down the takeover speed in the short and medium term, and focus on integrating existing brands. The future acquisition targets are mainly potential luxury brands. In 2019, Shandong's focus on the "buy and sell" strategy slowed down the takeover and did not increase the new major M & a plan. The Lycra group is the most important acquisition of Shandong Ruyi in 2019. In June, the Lycra group launched the launching ceremony of the stock exchange in Shandong, and is expected to become the five listed company in Ruyi banner.

At the same time, its SMCP group launched a M & a trip. In February 2019, the SMCP group announced that it would continue to expand its territory. In June of that year, SMCP group announced that it would acquire the French luxury brand De Fursac. At present, the financial performance of SMCP group in 2019 has not been announced yet, but the performance in the first half of the year is in line with expectations, sales grew by 9.5% to 540 million euros, and sales in mainland China increased by over 30%.

After the continuous acquisition, Shandong Ruyi highlighted a more serious debt risk in 2019. Up to the end of the three quarter, Shandong had 8 billion 750 million yuan in its willing account, and nearly 12 billion yuan in debt in the future, so that it was repeatedly downgraded by the international rating agency, S & P and Moodie. Fortunately, in October 18th, Shandong announced that it would be the second largest shareholder in Jining, and announced that it would provide unconditional and irrevocable joint and several liability guarantee for Shandong's "15 Ruyi debt". In December 19th, Shandong Ruyi announced that its issued $345 million bond was paid in full. At this point, Shandong's 2019 and China's due or corporate bonds were paid on schedule.

This largely alleviated the market's doubts about Shandong's willingness, but solving the debt problem is still a top priority after 2020, especially in the case of its brand's profitability. In addition, we can see from the acquisition trajectory that unlike the brand matrix of LVMH, Kai Yun and other luxury luxury brands, Shandong Ruyi's company includes both the retail brand downstream of the fashion industry chain and the upstream fabric suppliers and garment manufacturers. In the absence of previous experience, Shandong is planning to integrate its company and enhance its profitability in order to support itself as a "China LVMH" ambitions.