Textile firm to leverage Japan firm's brands, network and management
JINING, Shandong - Chinese textile manufacturer, Shandong Ruyi Group, said it expected to finish its 41 percent purchase of Japanese clothing maker Renown Inc on July 28, with the deal already approved by the government.
Shandong Ruyi announced on May 24 it would pay 5 billion yen ($56 million) for a 41.18 percent stake in Renown, making it Renown's largest shareholder when it finishes the deal. This is the first time that a Chinese company will snap up a controlling stake of a Japanese firm listed on the Tokyo Stock Exchange's (TSE) First Section. [Ruyi looks to sew up deal for stake in Japan's firm]
Stocks listed on the TSE are divided into the First Section for large companies and the Second Section for medium-sized firms.
The Export-Import Bank of China (China Eximbank) will provide liquidity loans of 290 million yuan ($42.69 million) to Shandong Ruyi for this buy.
"We have already made a 5-year plan with Renown Inc, which is a famous clothing maker with a 108-year history." Qiu Yafu, president of Shandong Ruyi Group told China Daily. "Our current goal is to help Renown Inc book a profit next fiscal year for the first time in 5 years."
"This deal is of great significance to Ruyi, as well as China's textile industry," said Qiu. "Since Ruyi already owns many of the world's leading technologies in textile manufacturing, we can take advantage of Renown Inc's reputable brand, efficient marketing network and advanced management ability through the merger."
"One of Renown's famous brands, D'Urban, already has several stores in China and is well-known among high-income customers. We have chosen Renown's other seven brands to enter China in the near future," he added.
Minoru Kitabatake, president of Renown Inc, said in a recent interview with Japanese newspaper Asahi Shimbun that the alliance would help the once struggling company pursue active expansion.
"In Japan, the market has shrunk due to a low birthrate and an aging population, making it difficult to find new customers in the extremely mature market. So we must go into a market with growth potential," said Kitabatake.
"Renown can procure textile material cheaply and thus will help cut costs by partnering with Shandong Ruyi," he said. "We will build a fully fledged sales network by opening hundreds of stores in China."
As a major Chinese textile player, Shandong Ruyi annually produces about 20 million meters of worsted wool fabric, 20 million meters of denim, 300 million meters of dyed cotton cloth and 150,000 tons of cotton yarn.
With total asset of 7.3 billion yuan and 30,000 employees, Ruyi reported 1.7 billion yuan in sales last year.
Based on Ruyi's annual report and the current financial standing of Renown Inc, Orient Securities estimated that Ruyi's profits will increase 84 percent, 37 percent and 24 percent respectively during the 2010 through 2012 period.
