Yahoo Finance Clarks family lose control of shoe chain in £100m rescue
The family that founded Clarks will lose control of the shoe retailer for the first time in its 195-year-history following a £100m rescue deal.
The support of Hong Kong-based private equity giant LionRock Capital will require the chain to go ahead with a company voluntary arrangement, a controversial form of insolvency.
Clarks said staff will continue to be paid during the process, which requires the approval of landlords and other creditors at a meeting next month.
Separately, however, the chain has told store employees that their roles are at risk of redundancy as part of a radical plans to revive the struggling business, Retail Week first reported. As many as 4,000 roles could be affected.
A spokesman said: "This announcement is not related to LionRock or the CVA proposal. It is part of Clarks’ ongoing strategy announced in May."
Bosses said the CVA should allow them to keep all 320 stores open and pay no rent on 60 sites. The remaining branches are expected to pay rent based on turnover.
If the CVA is successful, LionRock will buy a majority stake in Clarks, with the Clark family to remain an investor in the business.
Philip de Klerk, interim finance chief at Clarks, said the CVA was an "absolute necessity" to address the permanent shift in shopping behaviour following the pandemic.
“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," he said.
“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, a partner at Deloitte, which is running the CVA process, said the Clarks UK business faced acute liquidity pressure.
“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,” he said.
Daniel Tseung, founder and managing director of LionRock Capital, said: “Clarks is one of the world's most recognised consumer names and we look forward to working with the Clark family in extending its tradition of providing customers with top-quality products and exceptional service.”
The company is the latest in flurry of retailers that have turned to insolvency specialists to avoid complete collapse.
Separately, homeware seller Dunelm has pleaded for the right to stay open during the second lockdown after new restrictions will force it to shut its stores. The chain was open during the first lockdown.
A spokesperson said: "We are surprised not to see homewares included on the list of permitted businesses, particularly given this is inconsistent with the guidance provided during the nationwide lockdown.
"Throughout the coronavirus crisis, the role our homes play in our lives has been ever more important. As the public acts to protect the NHS over the next four weeks, there is a clear need for essential homewares as we spend the majority of our time indoors and move into winter.”
