PE Panorama: Firms still placing bets on consumer appetite for kitsch

28 July 2014   Category: News, Asia, Hong Kong, United Kingdom   By Paul Mackintosh

One of the more curious recent Asian outbound private equity (PE) deals has just closed with an investment by veteran and highly-regarded Hong Kong-based firm Baring Private Equity Asia (Baring Asia) in Cath Kidston, a UK designer brand founded by the London-based designer of the same name, that creates clothing, home furnishings and accessories in a characteristically chintzy retro style. Full financial terms of the deal, a secondary purchase of shares both from the existing private equity incumbent, Boston-based TA Associates, and Ms. Kidston and her management team, have not been disclosed, but it is understood to have valued the company at around £250 million (US$425 million), with the two private equity firms equally sharing around four-fifths of that. According to Baring Asia's own statement, they “will have equal ownership with TA, and will partner with TA and the current management team to expand the brand and further develop its network in Asia”.

Cath Kidston [the firm] originally invited TA Associates into its holding structure to fuel its expansion outside the UK, and the new investment repeats the thesis. Japan is now Cath Kidston's biggest foreign market, thanks to local chain Fast Retailing, and the brand currently has only four stores in China, with obvious potential for similar growth in that huge potential market. “Finding the right partner to help us manage the development of the Cath Kidston brand in Asia was a key consideration for us,” Kenny Wilson, CEO at Cath Kidston, said of the deal, while Dar Chen, a Baring Asia MD, commented: “Cath Kidston is an established and profitable brand and, with strong underlying trends in consumer demand across Asia; we look forward to further developing the brand across the region. We believe that cross-border transactions of this nature will increasingly enable Baring Asia to demonstrate the value that our pan-Asia network and hands-on operational experience can bring.” And Baring Asia has apparently made the right call about Cath Kidston's appeal to Asian tastes – Mr. Wilson described its allure for Japanese consumers as “kawai” appeal.

Few will question Baring Asia's ability to deliver on this thesis, with CEO Jean Eric Salata's outfit already a staunch favourite among Asian-focused limited partners across multiple funds. All the same, with the Chinese economy apparently on the threshold of a long period of slower growth and gradual readjustment to a more domestically-focussed model, and Japan cooling after the first boost of Abenomics, it's interesting to see some Asian firms still placing bets on the power of the Asian consumer. But then again, Asia's appetite for kitsch, especially the Western variety, is legendary, and apparently robust enough to weather a little slowdown. Just like Cath Kidston's homely 50s-flavoured nostalgia chic, some things never change.