A NORTH East family clothing business has been sold to a Hong Kong-based company in a £173m deal, landing its three main directors with a lucrative cash windfall.
South Shields-based Visage has been bought by Li & Fung which says it is looking for further acquisitions as it aims to raise its European profile.
Visage, which also has a base in Washington, Tyne and Wear, employs 200 people in the region and had been predominately owned by Raj Sehgal, his sister Anita Mehan and her husband Sanjeev Mehan.
The company was started by Raj and Anita’s parents Mukesh and Promila Sehgal in 1981 and supplies imported, private-label clothes to high street and mass retailers in the UK.
As well as the North East centres, the deal announced yesterday includes its Manchester design centre and branch offices in Hong Kong, Shanghai, Guangzhou, Dhaka and Delhi, which employ a further 300 people. It is understood the deal will not lead to any job losses – and more positions may be created as the firm expands.
Last night, a spokesman for Visage said: “The crucial thing for Visage is that Li & Fung are acquiring us as a platform to become one of the largest apparel businesses in Europe.
“Our expectations are that over a period they will grow the business substantially. Li & Fung are major suppliers to Wal-Mart and an Aldi and that leverage will create great growth opportunities for Visage.”
Anita and Sanjeev Mehan will stay with the South Shields business as full-time employees while Raj Sehgal will spend more time working for his parents at their Washington-based on-line fashion business Fashion Direct, while also acting as a consultant for Visage’s new owners.
Li & Fung is one of the world's largest sourcing companies in apparel and has been using the financial crisis as an opportunity to move into front-end retailing. Last October, it bought Wear Me Apparel, a US children's clothes company, for up to US$402m.
Li & Fung president Bruce Rockowitz said: “We will continue to pursue our acquisition strategy and the pipeline of potential deals is still strong.”
The deal will see Li & Fung pay £55.5m up front, with £13m in cash and the balance in loan notes, and an additional guaranteed consideration of £2m, also payable in loan notes.
The remaining £115.5m will be paid if the business meets certain defined earnings targets that have been agreed between the buyer and the seller.
In the year ending January 31, 2009, Visage earned a pre-tax profit of £19.4m, down from £20.5m in the previous year on sales of around £150m.
The three exiting owners bought the business from Mr and Mrs Sehgal with the equity support of HBOS in 2005.
The vendors were represented by Newcastle-based commercial law firm Muckle. Its senior partner Hugh Welch, said: “We have worked with the Sehgal family for the last 15 years and it’s a great pleasure to have worked with them on this latest transaction too.”
VISAGE began life in the 1960s when founder Mukesh Sehgal sold clothes door-to-door in South Shields.
The fledling business grew into a market stall operation and subsquently into shops.
In the early 1980s, the business changd shape as it waswas recreated as a fashion wholesaler mainly supplying independent retailers in South Shields. It now designs, sources and supplies casual wear to almost all of the UK’s main high-street retailers.
In 2005 Mukesh and Promila Sehgal sold the business to their son, daughter and son-in-law.
Mr and Mr Sehgal started Washington-based on-line fashion business Fashion Direct.
Deal makes history
THE deal is one of the largest private sales in the North East so far this century, far surpassing the sales of Newcastle-based SMD to Inflexion for around £70m, Burnopfield-based Quantum Specials for around £40m and Gateshead-based Anson to US oil and gas corporation National Oilwell Varco for around £70m.
Shawn Bone corporate finance partner at BTG McInnes Corporate Finance in Newcastle: "This surpasses any private company sales we have seen for some time.
"Many of the larger deals we are witnessing involve overseas companies buying British firms and this may be a reflection on the weakness of Sterling."