Tailoring specialist Bagir is to take legal action against Chinese textile and clothing giant Shandong Ruyi Group for breach of contract over a planned investment in the business.

Israel-based Bagir says it is launching the claim against Shandong Ruyi after it failed to make an outstanding payment of $13.2m as part of an agreement announced more than two years ago.

The two companies entered into a strategic partnership in November 2017, with Shandong pledging to invest US$16.5m for a majority 53.7% stake in Bagir. So far, it has received US$3.3m. 

In June last year, Bagir said it had agreed to extend the deadline for the remaining cash payment of $13.2m to 31 March 2020. However, this extension was conditional on Shandong providing the company with suit jacket manufacturing equipment, worth around $1.3m, for use in Bagir’s Ethiopian manufacturing facility, by the end of September 2019.

“The manufacturing equipment has not been delivered, to date. This further failure by Shandong Ruyi constitutes a material breach of the terms of the contract,” Bagir now says.

In a trading update, it adds that while conditions have remained challenging, the company saw sales increase 9% to $59.4m in the 12 months to 31 December 2019, up from $54.6m the year before.

It also expects to deliver a return to positive adjusted earnings before interest, tax, depreciation and amortisation for the year, from an Ebitda loss of US$1.0m in 2018. This improvement has been helped by a further reduction of operational costs during the second half.

Looking ahead, Bagir is finalising a plan to establish a new production line in Ethiopia to manufacture suit jackets, which requires an additional investment of $0.5m. The new line will be capable of producing 250 suit jackets per day.

It adds that a trial order for a large UK retail client will be completed and delivered during March 2020, “with a $0.85m suit order for 2020 already secured from this customer.

“In addition, based upon the new business pipeline there are good prospects for winning further orders from new customers during the current year.”

Micha Ronen, CEO of Bagir, says: “It is disappointing to announce our decision to have to take legal action against the Shandong Ruyi Group but we have been left with no alternative. 

“This will, however, mean our operational focus can now be solely focused on Bagir and making innovative, modern, design-led tailored garments for the world’s leading retailers.”

Shangdong Ruyi is one of China’s top 100 multinational enterprises, operating 13 domestic industrial parks and boasts a fully-integrated value chain spanning raw materials, textile processing, and apparel. 

Since 2016, the group has acquired several international luxury brands such as Aquascutum, Sandro, Maje, and Claudie Pierlot. It also owns fibre specialist The Lycra Company, whose brands include Lycra spandex/elastane, Coolmax, Supplex and Tactel.