Translated by
Nicola Mira
Nov 12, 2021
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SMCP: Imbroglio over mysterious share sale

Translated by
Nicola Mira
Nov 12, 2021

SMCP’s solid business position currently allows the fashion group to operate unimpeded, but the situation that is unfolding with regards to its ownership is becoming grotesque.


At the end of last week, the group's former majority shareholder, Luxembourg-based company European Topsoho (ETS), which held 53% of SMCP’s capital and is a subsidiary of Chinese industrial giant Shandong Ruyi, sold more than 12 million SMCP shares, equivalent to a 16% stake, to an unknown buyer or buyers.

Currently, neither SMCP’s creditors, still seeking reimbursement, nor its minority shareholders, nor even its senior management, know who has secured this 16% stake in the listed company, even though a declaration should have been made to the French market regulator by now. A bizarre scenario that is keeping observers guessing and is fuelling the wildest speculations, and above all stoking concerns about the French affordable luxury giant’s future.

A few clarifications are in order. In September, ETS defaulted on a €250 million repayment for a bond issue made in 2018. The creditors (BlackRock, Carlyle, Anchorage, Boussard and Gavaudan), receiving no information from ETS, began to take joint steps to recover the sums they had loaned. They appointed GLAS, a firm specialised in debt administration services, as trustee, and took a number of routine administrative steps, culminating in the request that 37% of the group's shares, out of the 53% held by ETS, be used as collateral.

A delicate situation, further complicated by the fact that SMCP is a listed company, with a 40% share of floating stock traded on the Paris stock exchange's Euronext index, and must therefore abide by specific rules, particularly with regards to threshold violations: were GLAS to hold a stake of more than 30%, it is legally bound to make a public offer to buy. It therefore acquired a stake of 29% and, on October 22, it initiated insolvency proceedings in Luxembourg, so that a receiver could take possession of the shares. In parallel, in order to lock in the group's management decisions, GLAS called for a board meeting in order to depose the members appointed by ETS and name a new board. The stated intention was to find a buyer for the entire 53% stake (the 37% share that was pledged and the unpledged 16%), and thus ensure stability of ownership for SMCP.

Except that ETS, presumably unwilling to accept this solution, decided to sell the 16% unpledged stake in the group. According to Challenges magazine, BNP Paribas Securities was involved in this operation. However, no one seems to be currently able to ascertain who the buyer(s) might be. According to FashionNetwork.com sources, and to a statement made by SMCP on November 10 in response to questions asked by Gouvernance en Action (GeA), a business ethics specialist, no statutory declaration has yet been made to French financial market regulator AMF.

SMCP being a listed company, a shareholder with a 16% share of the capital should have declared this divestment. And any new shareholder with a significant stake would have to make itself known. Even if the sale was made to a plurality of shareholders, 17 of them would have been needed in order not to exceed the 1% capital threshold, above which a declaration to AMF is mandatory.

Such an eventuality is clearly implausible, but it further muddies the waters, making a quick resolution of the matter unlikely.

Petitioned by GLAS, the Paris trade court has reportedly issued an injunction to ETS with regards to its reporting obligations. “Given the facts we are currently aware of, it is possible that the alleged sale made by European Topsoho is illegal and prejudicial to its creditors,” GLAS noted in a statement. This might temporarily block the sale, subject to a hearing which is scheduled for November 23. GLAS is relying primarily on a future annulment of the operation, as it was made during the so-called suspect period according to insolvency rules. This could make the sale null and void.

Until then, all the players involved are seeking to discover where the shares are and who are the buyer or buyers. Two dates appear to be crucial in the coming days. A hearing this Friday in Luxembourg, to grant or deny the start of insolvency proceedings for European Topsoho. And the holding, confirmed by SMCP, of a meeting of the group's board of directors “in the next few days.” The atmosphere will likely be electric at the French affordable luxury giant’s headquarters.

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