Reuters – China’s Li & Fung buys Italian fashion house Cerruti
By Astrid Wendlandt, December 22, 2010

* U.S. fund MatlinPatterson sells Cerruti
* Trinity, part of Li & Fung, pays 53 million euros
* Cerruti CEO Florent Perrichon stays in place

PARIS, Dec 22 (Reuters) – Li & Fung group’s Trinity has bought Cerruti for 53 million euros ($70 million) from the U.S. fund which salvaged the Italian fashion house best-known for its woollen men’s suits and 1881 perfume.

Hong-Kong based Trinity, the Chinese group’s menswear retail arm and a long-time Cerruti licensee, is moving up the value chain by becoming full owner of the brand.

Cerruti makes a significant proportion of its sales in China, the world’s fastest growing luxury market.

It is being sold by U.S. fund MatlinPatterson, a specialist in distressed assets, which bought it out of administration in 2006.

“The Cerruti brand is coming out of its convalescence period by integrating a large group such as Li & Fung with a world presence and significant means,” Cerruti Chief Executive Florent Perrichon, told Reuters on Wednesday.

Trinity’s acquisition of Cerruti, which rivals Hugo Boss and Armani, highlights Chinese retailers’ growing appetite for European luxury brands, particularly those with a rich heritage which suffered during the financial crisis.

Li & Fung, a consumer goods exporter which is a top Wal-Mart supplier, has gone on a shopping spree in recent months, with deals including the purchase of Oxford Apparel, which makes menswear and distributes through retailers in the United States.

The Chinese group also recently bought British private-label apparel supplier Visage.

Other Chinese groups are on the lookout for investments in European luxury brands. YGM Trading, which bought French design house Guy Laroche in 2004 and is the Asian licensee for British brand Aquascutum, is hunting for deals.

So is Fosun International, which took a stake in French upmarket resort operator Club Med in June.

Loss-making Cerruti, which has made big investments in advertising and hired French singer Marc Lavoine as the brand’s face, is hoping to break even next year.

BRAND RECOVERY

For 2010, Cerruti expects to make an operating loss of around 4 million euros on revenue of 150 million, against a similar operating loss in 2009 on turnover of 137 million.

Perrichon, a former LVMH executive who has led Cerruti since 2008, said Li & Fung had asked him to remain in place and the deal is expected to close in March.

Cerruti operates in France, Switzerland and Japan through various licensing and distribution arrangements and boasts a refurbished flagship store in Paris which re-opened this year.

Its business model is similar to Balmain, which collapsed in the mid-2000s and is growing mainly through licences.

Cerruti recently relaunched its womenswear operations and presented its first collection at Paris fashion week in March, designed by Britain’s Richard Nicoll.

The brand’s founder, Nino Cerruti, is no longer involved with the company but has kept the family’s textile plant in Italy, which still supplies Cerruti.

Cerruti makes its men’s couture lines in Italy and women’s luxury lines in Belgium but outsources the production of its second lines, accessories and perfumes to licensed partners.