Page 1

1 of 173 DOCUMENTS

The Straits Times (Singapore)

March 20, 2011 Sunday

Charles & Keith and LVMH become sole mates;

LENGTH: 1330 words

It's a fairy tale that has seen two brothers go from Ang Mo Kio to Paris.
Charles & Keith, the once-humble local shoe retailer, is now partly owned by French
luxury giant Louis Vuitton Moet Hennessy (LVMH).
The Wong brothers, who own the company, have sold a 20 per cent stake to L Capital
Asia, the private equity arm of LVMH, for more than $30 million, sources told The
Sunday Times.
The deal, which values the company at close to $200 million, was completed in November
after LCapital fought off a slew of rival suitors which included other private equity
funds, high net worth investors and even a manufacturing firm.
The feeding frenzy is testament to the growth of the local firm, which has shot to
prominence since brothers Charles Wong, 37, and his brother Keith, 35, opened their
first store in Amara Hotel in 1996.
But the deal is more than just about the money, said the elder Mr Wong, the chief
executive, confirming the deal to The Sunday Times from Shanghai, where he is now
based. The younger Mr Wong is the chief operating officer and designs the shoes.
It will give Charles & Keith access to the branding expertise of LVMH, owner of the
world's top fashion labels including Marc Jacobs, Dior and Givenchy, and allow the
firm to benefit from being taken under the wing of LVMH as it expands around the globe.
The company wants to conquer the United States, China, India and Western Europe. It
already has 229 stores across mainly Asia and the Middle East under its Charles &
Keith and Pedro brands.
Charles & Keith sells women's shoes while Pedro carries footwear for both men and
women.
Mr Wong said he was happy with the deal, which took a long time to come together.
'There have been a lot of companies talking to us and we spent a lot of time considering
all the options. We were definitely reluctant to sell the stake, but in the end it
was more for the company to grow to the next level. We were looking mainly at knowledge
transfer and for someone to help us understand certain markets deeper.
'We are looking at the bigger picture and how we can grow our company's revenue to
three to five times what it was last year in a short time. We hope we can, through
them, expand, improve and learn. That's the main reason we let them have the stake.'
 Page 2
Charles & Keith and LVMH become sole mates; Homegrown shoe retailer sells 20% stake
for more than $30m and access to branding expertise of owner of top fashion labels
The Straits Times (Singapore) March 20, 2011 Sunday
Recounting events of last year, chief financial officer Dicky Koh said the brothers
had been happy the business was running at a good speed - it has grown at a compounded
annual rate of 28 per cent for the past decade.
'But L Capital wanted to come in and add that turbo, to help us grow even faster,'
he said.
'They already knew that if they came in, even without doing anything, they would be
able to benefit just as a pure financial investor. But they also had the expertise
and people that can help us. That was the kind of fit we were looking at.'
In the end, it was the promise of the chance to conquer China that appeared to have
swung the deal.
Mr Wong had witnessed the worldwide success of Sephora, a global women's cosmetics
chain owned by LVMH, especially in China, and felt that Charles & Keith could learn
from Sephora's growth strategy.
He has made it his personal mission to succeed in China and moved there permanently
to oversee the business 11/2 years ago.
There are now six Charles & Keith stores in Shanghai, although they are not yet profitable,
Mr Koh said.
Charles & Keith wants to open 100 stores there in the next five years. It plans to
own all the stores, as its does the stores in Singapore. The company franchises its
stores everywhere else.
What was key is LVMH's connections with landlords in China, Mr Koh said.
'They can put us at the negotiating table and say that we have all these brands under
our portfolio, including Charles & Keith, and this will help us secure a good rate.'
Recently, the company also went with people from LVMH to meet potential partners in
the US, a market it has not yet ventured into, said Mr Wong.
Charles & Keith will also leverage on its new owners and send staff to Paris, or get
trainers to come to Singapore, so they can attend marketing and visual branding courses
that will help in-store display concepts and marketing campaigns.
The deal was struck after a nine-month-long pursuit led by Mr Ravi Thakran, managing
partner of LCapital Asia. They were introduced by PrimePartners Corporate Finance
chairman Quek Peck Lim, a veteran banker. It almost fell through at some points, when
the brothers got cold feet because of the emotional attachment to the company they
had built from scratch, and also over the uncertainty of bringing in a fund with a
short-term investment horizon of just four to five years.
Moreover, the brothers did not want to sell, Mr Koh said, because they did not need
the money.
But Mr Thakran persevered. He assured the brothers that the investment was genuine
and to help the firm grow in the long run.
Meetings took place in Paris, Singapore and China, and Mr Koh and the Wongs met Mr
Daniel Piette, head of investment funds and managing partner and chairman of L Capital
Management, as well as Mr Andrew Wu, LVMH's China director. Mr Wong also spoke frequently
with Mr Jacques Levy, the former president and chief executive of Sephora Worldwide.
Eventually, Charles & Keith came up with a 'wishlist' of what it wanted from its new
partners. It would receive training from LVMH and get LVMH senior management on its
board.
That was how it was agreed that one board seat was to go to Mr Levy, who unfortunately
resigned last week from LVMH to take up a position as adviser to Guess founder Paul
 Page 3
Charles & Keith and LVMH become sole mates; Homegrown shoe retailer sells 20% stake
for more than $30m and access to branding expertise of owner of top fashion labels
The Straits Times (Singapore) March 20, 2011 Sunday
Marciano. Mr Wong could not comment on whether or not Mr Levy would remain on the
Charles & Keith board.
With the French luxury giant taking the company under its wing, will Charles & Keith
still retain its value-for-money image?
Mr Wong said that while it is true that the company is looking to slowly move its
branding more upmarket, it will always produce affordable shoes for the masses.
'(Spanish clothing retailer) Zara is a very good name for that - it is fast fashion
and affordable. We want to make sure that our consumers see our brand as high fashion
and also suitable for them,' he said.
The company will also remain separate from LVMH's stable of designer brands.
'We don't want to ride on that brand. We want to maintain our DNA in terms of how
we grow our two brands. We don't see the need to associate, not even with Sephora,'
Mr Koh said.
As for what happens after LVMH's fund exits its investment, Mr Koh said the company
will probably look to either list on a stock exchange or buy back the shares.
'We feel that if we are able to capture as much value-add from them within these next
five years, then it is mission accomplished for us.'
He added: 'Of course as we grow to a good size, probably, an IPO (initial public offering)
could be a good option for us. But we are not looking at that for now. There is still
a lot of room for us to grow.'
Mr Wong said: 'My goal is to make sure that our brand is in all countries and cities,
to make this a true global brand from Singapore.'
chanckr@sph.com.sg
INVESTING IN ASPIRATIONAL BRANDS
L Capital Asia was launched in 2009 by Louis Vuitton Moet Hennessy (LVMH) with a US
$500 million (S $640 million) war chest, and has been looking to make value investments
in regional brands.
Headed by managing partner Ravi Thakran, also group director of South Asia, South-east
Asia and Middle East of the LVMH Group, its first investment was as part of a consortium
that bought out Sincere Watch for $113 million.
Charles & Keith was its second investment, and a deal to take a stake in Hong Kong's
Emperor Watch & Jewellery for HK$240 million (S $40 million) last year, its third.
While LVMH focuses on the high-end segment, L Capital Asia invests in both aspirational
and luxury brands. The fund still has about US $425 million to invest by 2014; it
has studied 108 consumer companies in China, India and South-east Asia and shortlisted
nine, according to a Financial Times interview with Mr Thakran last year.

LOAD-DATE: March 19, 2011

LANGUAGE: ENGLISH

PUBLICATION-TYPE: Newspaper

Copyright 2011 Singapore Press Holdings Limited