Lanvin Group announced n March that it would go public, planning to list on the New York Stock Exchange (under the ticker symbol “LANV”) after it merges with special purpose acquisition company (“SPAC”) Primavera Capital Acquisition Corporation in a move to raise up to $544 million and nab a “pro forma enterprise value of $1.5 billion and a combined pro forma equity value of up to $1.9 billion.” In a statement this spring, Lanvin Group, which rebranded from Fosun Fashion Group last fall, asserted that “through the business combination,” it is aiming “to catalyze growth” both from an acquisition perspective and as a result of “growth across Europe, North America, and Asia.”
The news about the impending SPAC for Lanvin Group, which maintains majority stakes in Sergio Rossi, Wolford, Caruso, St. John, and its “flagship” Lanvin, follows from Perfect Corp revealing that it would go public on the Nasdaq by merging with Provident Acquisition Corp in a deal expected to value the New Taipei City-based startup, which provides software to beauty and fashion companies, at upwards of $1 billion. And before that, Zegna Group made its stock market debut in December 2021 by merging with Investindustrial Acquisition Corp., in furtherance of a deal that gave a valuation of $3.1 billion.
While SPACs are not a novel way of raising capital, which roots dating back to the 1990s, they have seen a marked rise in recent years. Last year, a “record” number of de-SPACing transactions were carried out, up from 248 in 2020 (and a total of $83.3 billion raised) to 613 in 2021. An alternative to the traditional initial public offering (“IPO”) process, which is a notoriously costly and time-consuming transaction, mergers with SPACs have been viewed as a quicker, more efficient, and more cost-effective way to go public for target companies, such as Lanvin Group, Perfect Corp, and Zegna Group, among others.
“Despite the large number of SPACs competing for acquisition targets” in recent years, Akin Gump attorneys Kerry Berchem and Patricia Precel, previously stated that many SPACs – which are essentially shell companies seeking to merge with private companies with the intention of taking them public – “have been able to find targets and close their de-SPAC transactions.” Nonetheless, they assert that SPACs have faced obstacles in 2022, which could serve to tame such sweeping year-over-year growth when it comes to the number of SPAC transactions, as “there are still many SPACs competing for targets, including those with shorter time frames to complete a transaction, [and given that] the SEC may issue new rules governing SPACs aimed at preventing SPACs from evading investor protections associated with a traditional IPO.”
Beyond that, there is the chance that litigation may sour such deals. Not merely a potential threat, SPAC-centric litigation has come into fruition by way of what Paul Weiss characterized in a client note as “a substantial number of lawsuits” that have been filed by SPAC shareholders, who are “contesting the terms of – or disclosures surrounding – de-SPAC merger transactions.”
The rise in SPAC-related litigation has resulted in only one substantive ruling, which came by way of the Delaware Court of Chancery in January 2022 (In re Multiplan Corp. Stockholder Litigation), in which the court denied a motion to dismiss, thereby, enabling the plaintiffs’ claims against the SPAC’s sponsor and its directors – namely, that the defendants breached their fiduciary duties by neglecting to disclose vital information in connection with the merger of Churchill Capital Corp. III (the SPAC) and Multiplan Inc. – to proceed. According to the court, Delaware’s entire fairness standard of review applies to a de-SPAC transaction challenged on the basis of misleading statements or omissions in the SPAC’s proxy statement.
Reflecting on the potential impacts of the court’s decision, Mayer Brown LLP partners John Ablan, Philip Brandes, and Brian Massengill stated in a note for Harvard Law School’s Forum on Corporate Governance that “although the court’s opinion is only a denial of a motion to dismiss and not a final ruling on the merits, it is an important development for SPACs and SPAC sponsors, directors and officers,” nonetheless. Among other things, “the court’s conclusions signal potential increased litigation risk for SPAC directors in connection with business combination transactions. “A very common feature of SPACs,” they state that “the differing incentives for Class A versus Class B stockholders may present an inherent conflict of interest requiring the application of the ‘entire fairness’ standard to a de-SPAC business combination transaction.”
As for whether such headwinds in the space will deter future transactions, the recent trio of fashion deals, including the impending Lanvin SPAC, seems to suggest that more may still be to come even if the numbers are generally falling this year. “Only 24 SPAC mergers worth $28.3 billion have been announced so far this year, versus the 93 deals worth $233 billion in the first quarter of 2021,” per Reuters.
In light of “the scope of the MultiPlan ruling, and the novel application of traditional fiduciary duty principles in the SPAC contexts,” boards of directors that may be considering SPAC transactions may be proceeding with caution. According to Berchem and Precel, boards would be well served to “follow additional developments in the case, identify real and perceived conflicts in the oversight of any SPAC related transaction, give careful consideration to disclosures and risk factors, and consider obtaining a fairness opinion from a financial advisor if there are conflicts of interest among a SPAC’s directors.”
In terms of Lanvin Group’s plans in the wake of its merger with the SPAC, it is looking to super-charge the growth of its “uniquely positioned” brands in order to capture a greater share of the global luxury goods market, which it says is expected to reach $430 billion by 2025. With a “strong foundation” in Europe, and “nearly half of [its] revenue currently derived from EMEA,” the Group is looking to place “a strategic emphasis on realizing the brands’ untapped potential in both Asia and North America, where its brands are at an inflection point to achieve rapid and significant future growth.” Greater China accounted for just 14 percent of the Group’s global revenues in 2021, while the North American market contributed 33 percent, with more than half of that coming exclusively from St. John.
Against this background, and given its “unparalleled access and track record in backing international consumer brands and powering their growth” in the fast-growing Asian market, and given that its brands “are also beginning to unalock the huge growth potential of the North American market by opening new retail stores, expanding e-commerce channels, and launching dedicated marketing and brand collaborations,” Lanvin Group claims that it is “well-positioned to capture the enormous growth potential driven by flourishing demand for luxury goods globally.”
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