Chinese textile and clothing giant Ruyi Group says it is in “friendly negotiations” with Bagir Group after the Israeli men’s clothing manufacturer threatened legal action over an unpaid US$10m investment in the business.

Bagir last month launched the claim against Shandong Ruyi after it failed to make an outstanding payment said to be in the region of $13.2m as part of an agreement in November 2017 that would have seen Shandong acquire a majority 53.7% stake in Bagir for US$16.5m. So far, US$3.3m of this has been paid. 

In June last year, Bagir 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 equipment worth around $1.3m to establish jacket production in Bagir’s Ethiopian manufacturing facility, by the end of September 2019. When this deadline passed and the manufacturing equipment had still not been delivered, Bagir said Shandong Ruyi had breached the terms of the contract.

However, Chris Chen, Ruyi Group spokesman and the founder of WeBridge Consulting, says the acquisition plan was originally scheduled to be completed by the end of 2018 but had to be postponed to May 2019, as the Chinese government was taking more time to review the deal. 

“Since 2019, the textile and apparel industry has faced great uncertainty under the impact of the Sino-US trade war,” he adds. “Simultaneously, the operation of Bagir Group in recent years has not improved as promised before the acquisition, and its Ethiopian factory has not attained the production goal by 2018. Ruyi Group and Bagir Group had negotiated to delay the settlement day.”

Chen continues: “Ruyi Group is conducting friendly negotiations with Bagir to properly resolve the acquisition issue and ensure that both parties’ benefits are fully protected.”

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Since 2010, Ruyi Group has acquired international brands such as Japan’s Renown Group, British fashion brand Aquascutum, French luxury fashion brand SMCP Group (which owns the Maje, Sandro and Claudie Pierlot brands), Hong Kong’s Trinity Group, and The Lycra Company. Its acquisition of Bagir – which produces 3 million garments a year – would have provided processing and manufacturing capacity as well as improving its global footprint.

“These acquisitions have demonstrated Ruyi’s determination to enter the fashion field from manufacturing. Even though the acquisition of Bagir has encountered some setbacks, Ruyi still firmly believes in the transformation to the high-end fashion industry. The follow-up issues are still under negotiation,” the company notes.