LVMH fund buys stake in Chinese fashion brand

Women's clothing company Ochirly reportedly valued at $2 billion.

The Chinese investment company CITIC Group is joining with a private-equity fund financed by the French luxury giant LVMH Moet Hennessy Louis Vuitton SA to buy a 10 percent stake in the Chinese fashion brand Ochirly, the South China Morning Post reported on Thursday.

Ochirly is a Hong Kong-registered brand that was founded by mainland businessmen in 1999. The company's latest numbers show it had annual revenue of more than 250 million yuan ($39.7 million) in 2009 and has more than 800 stores in 28 provinces and cities.

The public relations director for Ochirly, who would only provide her surname, Luo, said on Thursday that the company has not received an official statement about the deal. L Capital Asia, a private-equity fund financed by LVMH, could not be reached for comment.

The South China Morning Post reported that L Capital Asia paid $200 million for the stake in Ochirly, a women's clothing company that is valued at $2 billion and is considering listing on the Hong Kong or New York stock exchange.

This is the first time the financial arm of LVMH has held a share in a Chinese mainland company.

Analysts said the reported deal is notable for showing that an increasing amount of international capital is being invested in the world's second-largest luxury market.

"Global investors' attention (to the Chinese luxury market) has been strong ever since Hermes bought the Chinese brand ShangXia," said Yang Qingshan, chairman of the China Brand Strategy Association and secretary-general of the China Brand Wealth Forum.

"And now it's just becoming a growing trend as more foreign capital eyes the booming market," said Yang.

In December, the Singapore-headquartered L Capital Asia announced it would invest in the Chinese fashion brand Jorya. Both Jorya and Ochirly market their products, ranging in price from 500 to 1,000 yuan per item, toward working women.

"Industry tycoons like LVMH merely need a Chinese brand that is full of potential that they can reshape and operate in a Louis Vuitton style, a plan that has been put into effect successfully in China," said Yang.

Rupert Hoogewerf, the founder of the Hurun Rich List, which ranks the wealthiest people in China, had similar thoughts.

"This investment signals general optimism in the international capital market about the Chinese brand," said Hoogewerf. "What has been brought here is not only good money but also expertise and know-how about brand management."

Yang, though, noted that international investors who want to put their money into Chinese brands have few choices.