UK footwear chain Clarks has struck a partnership with Asian private equity firm LionRock Capital, which sees the latter take a majority stake in the business.

The GBP100m (US$130m) investment will enable Clarks to position the business for future long-term sustainable growth and deliver its strategy to revitalise the iconic footwear brand as it enters its third century in line with its ‘Made to Last’ strategy announced in May.

The partnership will also enable Clarks to benefit from the expertise that LionRock Capital brings to grow the brand globally, most notably in China and across the rest of Asia Pacific.

The investment will be subject to shareholder approval, and shareholders will be asked to vote on the proposed transaction in December. The investment is also subject to a company voluntary arrangement (CVA) for its UK and Republic of Ireland businesses in relation to its store portfolio.

A CVA is an insolvency procedure that allows a company to reach a voluntary agreement with its business creditors to repay its debts to avoid going bust.

Speculation began in October that Clarks was reportedly planning the closure of 50 stores as part of such a CVA, with the company understood to have started discussions with landlords over the potential switch to a ‘turnover rent’ model as part of its restructuring towards the end of the month.

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“Our new strategy, in conjunction with our new partnership with LionRock Capital will create a strong and sustainable future for this unique and iconic brand,” says Clarks CEO Giorgio Presca.

“The challenges to our business brought on by Covid-19 have meant that we need more resources and investment in order to fully deliver this strategy and safeguard the future of our business. The new partnership with LionRock Capital will provide this as well as the expertise to grow the Clarks brand in China, which remains a primary opportunity.”

Philip de Klerk, interim CFO at Clarks, adds: “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 outlines a combination of a reduction of rent and a move to rebase Clarks’ rental cost base through a turnover-based model that aligns to future performance and reflects the wider retail market. As part of the CVA, we will move 60 of our 320 stores to nil rent. 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.”

Gavin Maher, partner at Deloitte says the turnover rent model better aligns the risk and reward of trading during these uncertain times and the CVA, together with the proposed investment from LionRock, provides a stable platform upon which the management’s transformation strategy can be delivered.

Daniel Tseung, founder and MD of LionRock Capital adds: “We believe our investment would create a stable platform for the company from which to manage through the unprecedented crisis, holistically restructure and transform the business and further expedite the brand’s growth globally going forward.”