Clarks announces CVA and £100m rescue deal to save its stores
After nearly two centuries in family ownership, Clarks has clinched a rescue deal with a Hong Kong investment company taking control of the business, keeping stores open and cutting relatively few jobs for now.
But its staff can't celebrate just yet as the deal is dependent on a company voluntary arrangement (CVA) being approved by its creditors and it’s asking for significant rent cuts from its landlords.
The 195-year-old retailer has been rescued in a £100 million deal by private equity investor LionRock Capital.
And it’s a surprise that the stores will all continue to operate given how the company had said at its last results announcement that some of them were a drag on the business. It's also a surprise insofar as most private equity deals are conditional on unprofitable shops being axed and headcount reduced. But Clarks clearly thinks that with more generous rent deals, some shops could cease to be a drag and could be net contributors to the firm's recovery. That said, up to 700 jobs are being cut that could mean a reduction of two staff per store.
The company hopes to push through new rent agreements based on turnover for most sites, with no rent being paid on 60 of its shops. This is something landlords have been asked for again and again by other retailers in recent years, but particularly in the light of the pandemic this year.
Clarks’ interim finance chief Philip de Klerk said: “In order to address the permanent shift in structural shopping behaviour as a result of the Covid-19 pandemic, the CVA is being launched out of absolute necessity.
“The proposal to creditors aligns to future performance and reflects the wider retail market. It is important to stress that we are not announcing the closure of any stores today, and employees and suppliers will continue to be paid.”
The vote will happen next month and assuming it goes through, LionRock will hold a majority stake, although the Clark family will still be minority shareholders.
LionRock’s Daniel Tseung said: “Clarks is one of the world's most recognised consumer names and we look forward to working with the Clark family in extending its tradition of providing customers with top-quality products and exceptional service.”
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