Mulberry unveils £7.6m buy-out deal

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The Independent Online

Mulberry, the British luxury leather goods maker, is passing into foreign control after unveiling details yesterday of a £7.6m deal with Christina Ong, the Singapore-based fashion and hotel tycoon, and her husband, Ong Beng Seng, the oil magnate.

Mulberry, the British luxury leather goods maker, is passing into foreign control after unveiling details yesterday of a £7.6m deal with Christina Ong, the Singapore-based fashion and hotel tycoon, and her husband, Ong Beng Seng, the oil magnate.

Under the terms of the agreement, the Ongs will take an initial 41.7 per cent stake in Mulberry through their wholly owned vehicle, called Challice. They will subscribe in cash for 15,000,000 new shares in the UK company at a price of 32p, and for a further 8,000,000 new preference shares at 35p.

In addition to the initial investment, the Ongs have entered into a joint venture agreement with Mulberry to set up five stores in the United States. Each party will contribute $1m (£667,000) to the business and all additional funding required will be lent to the joint venture by the Ongs.

After two years, if the agreement has proved successful, the Ongs will have the right to covert their preference shares to take a final 52.3 per cent stake in Mulberry.

Roger Saul, Mulberry's chairman and chief executive, said: "Over the last three years, we have been really very hard hit by the strength of the pound, being an international design company with our manufacturing base in the UK.... This is the best dream we could have hoped for."

Mulberry yesterday posted results for the year to 31 March, showing a pre-tax loss of £666,000, down from £1.779m the previous year, on turnover down 4 per cent at £26.4m. Shares in the company closed up 8p at 41p.

Mr Saul said the deal with the Ongs was part of a wider strategy of building Mulberry into a world brand, following on from existing partnerships with Kravets in the US to license its home furnishings, and Toray Industries in Japan.

The Ongs already have a strong presence in the UK, where they own the Metropolitan Hotel and the Armani fashion franchise. In the US, their biggest source of revenue is Armani Exchange, a discounted designer clothing range.

Consolidation in the luxury goods sector has been gathering pace as cash-rich companies seek to transform themselves into international conglomerates. Last year, Prada, the Italian fashion house, bought Helmut Lang, Jil Sander and Church & Co, and teamed up with LVMH to acquire Fendi. Meanwhile, Gucci took control of Yves Saint Laurent, and LVMH acquired Tag Heuer, the luxury watch brand.

Claire Kent, an analyst at Morgan Stanley Dean Witter, said: "The barriers to entry in the luxury goods sector are huge. It is much quicker to make acquisitions than to try to invent your own brands."

She added that the recovery in the Asian economy after the near collapse in 1997 hadcontributed to a feeling of optimism that has helped fuel growth.

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