UK clothing company Superdry plc has signed an intellectual property joint venture agreement with Reliance Brands Holding UK (RBUK) for the sale of its IP assets — including the brand and related trademarks in India, Sri Lanka, and Bangladesh — to the JV for £40 million.
RBUK will own 76 per cent in the JV, while Superdry will hold the rest, a release on the latter’s website said. Superdry said it expects to get cash proceeds of £30.4 million from the sale, net of fees and taxes.
Reliance Retail Ventures is the holding company of RBUK through its subsidiary Reliance Brands, which is Superdry’s exclusive franchise partner in India since 2012, when the brand was introduced in the country.
Post the transaction, Reliance Brands will control the brand operations in India, Sri Lanka, and Bangladesh. RBL said that this strategic evolution of brand ownership aimed to capitalise on the increasing affluence and evolving consumption patterns of Indian shoppers. “Coupled with Reliance Brand’s appetite to invest in accelerating Indian consumption narrative, the deal paves way for Superdry’s future expansion in the country and neighbouring territories,” it said.
Long-term collaboration
Under the terms of the transaction, Superdry will permanently transfer its brand IP assets in the three South Asian markets to the newly formed JV. It will also invest £9.6 million in the JV, to be set off against the deal consideration receivable by it.
The agreements include provisions to support long-term collaboration between the companies, including use of new designs. They include covenants that are customary in IP ‘co-existence’ arrangements, as well as customary provisions relating to maintenance and enforcement of IP rights.
In addition, the agreements grant Superdry a perpetual, irrevocable, and sub-licensable licence to continue manufacturing (or engage third parties to manufacture) goods in the three nations. Superdry will continue to supply finished goods to Reliance at standardised commercial terms.
The transaction is subject to approval by Superdry’s shareholders and lenders.
Future growth
Superdry said it believed the partnership with Reliance would provide the best opportunities for the future growth of the Superdry brand in South Asia, allowing it to focus on growing its brand and increasing sales in its more established territories.
Superdry UK will maintain a stake in the brand for the Indian territory and will continue to support brand development through sharing expertise in design, product development, and marketing.
For the financial year to April 30, 2023, the South Asian IP generated approximately 1.8 per cent of the total group sales and contributed revenue of £11 million and profit before tax of approximately £2.6 million, including centralised costs allocation. The carrying value of the gross assets included in the transaction is nil.
Superdry said it will use the transaction proceeds to increase the strength of its balance sheet, boost liquidity, and fund its ongoing working capital requirements as part of a turnaround plan.
The UK fashion retailer has been struggling to contain costs and improve cashflows.