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Embattled UK fashion retailer Superdry is selling its south Asian intellectual property assets for £40mn as part of a joint venture deal with Reliance Brands, India’s largest retailer.
Superdry shares were up more than 20 per cent on Wednesday lunchtime, after the retailer announced the partnership with Mukesh Ambani’s Reliance, covering its brand assets in India, Sri Lanka and Bangladesh.
The deal comes after Superdry sold its intellectual property rights in the Asia-Pacific region for £34mn to South Korea’s Cowell Fashion Company this year, in a similar transaction, as it sought to strengthen its balance sheet amid a cash crunch.
Superdry’s shares have lost about half of their value over the past year as the indebted retailer has battled a cost of living crisis that hit customers’ spending power.
In April, the company said it no longer expected to be “broadly break-even” as a result of weaker demand from cash-strapped shoppers. Last month it reported a pre-tax loss of £78.5mn in the year to the end of April, compared with a £17.6mn profit in the previous year.
In Wednesday’s announcement, Superdry said the consideration for the sale of its south Asian intellectual property was £40mn. It is expected to receive £28.3mn in net proceeds from the deal, which would be used to boost its liquidity and help fund part of a turnaround plan.
Reliance’s UK subsidiary RBUK and Superdry will own 76 per cent and 24 per cent of the new entity respectively.
Ambani, India’s wealthiest man, is betting on shopping to help drive his petrol-to-telecoms conglomerate’s future growth, as incomes rise in the 1.4bn-strong nation.
Superdry has taken steps in recent months to raise funds and shore up its balance sheet. This year the company borrowed £80mn from Bantry Bay Capital before securing a further £25mn from specialist retail investor Hilco, which had also lent Wilko £40mn before the discount chain collapsed owing an estimated £548mn to unsecured creditors.
In a statement on the deal, Superdry said: “Considering the backdrop of a growing Indian economy, a growing population of affluent shoppers, and ever-increasing apparel consumption rates, the Superdry brand in the market has attractive potential.”
“As the leading fashion retail operator in India, RBUK is best placed, through a majority IP ownership stake, to maximise the opportunity,” it added.
Reliance introduced the UK retailer to India in 2012 via a franchising deal. Superdry said the new development in the pair’s relationship would allow the company to “focus on growing its brand and increasing sales in its more established territories, where it has strongest expertise”.
The transaction is the latest UK retail deal for Reliance, which acquired toy shop Hamleys in 2019 for £68mn. It has also signed franchise agreements with luxury fashion brands from Burberry to Balenciaga, while also building stores selling more affordable fashion.
Reliance Retail has raised billions of dollars from private equity groups and sovereign wealth funds this year in deals valuing the company at $100bn, securing financial fuel for further expansion.
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