20-F: Lanvin Group Secures $20 Million Share Repurchase Agreement with Meritz Securities

Lanvin Group enters into a side letter agreement with Meritz Securities to repurchase shares and adjust security arrangements.

Summary

• Lanvin Group Holdings Limited (PubCo) and Meritz Securities Co., Ltd. (Investor) have entered into a side letter agreement to the Amended and Restated Relationship Agreement (ARRA).
• PubCo will purchase a total of 5,245,648 PubCo Subscription Shares from Investor for a total purchase price of $20,000,000.
• The purchases will occur in four tranches between April 30, 2024, and August 30, 2024.
• If the Coverage Ratio falls below 150% during the period from April 30, 2024, to August 30, 2024, PubCo will purchase additional First Tranche Subscription Shares (or Second Tranche Subscription Shares if First Tranche Subscription Shares are no longer available) from Investor to bring the Coverage Ratio to 200%.
• The price per share for these additional purchases will be equal to the Agreed Return Per Share, providing Investor with an 11.5% XIRR.
• PubCo will procure the deposit of 678,081 common stocks of Paref SA into a Charged Securities Account as additional security for Investor.
• These Paref Shares will be released in three tranches after payments are made to Investor on or before June 28, 2024, July 31, 2024, and August 30, 2024.
• Investor and PubCo will use reasonable best efforts to agree in writing on objective criteria or circumstances under which it shall be deemed reasonable for Investor to withhold its consent to a Share Top Up or a combination of Cash Top Up and Share Top Up under, and for the purpose of, Clause 6.2(b) and Clause 6.2(c) of the ARRA.
• The parties agree to amend Clause 7 of the ARRA regarding Underwriting Fees, with PubCo paying Investor quarterly amounts of US$0.0359 and US$0.0385 per First Tranche and Second Tranche Subscription Share, respectively.
• PubCo will reimburse Investor for fees, expenses, and costs up to US$100,000 related to the transactions contemplated in the letter.

Sentiment

Score: 6

Explanation: The document is neutral to slightly positive. It outlines a financial agreement with specific terms and conditions. While it involves obligations for Lanvin Group, it also provides Meritz with a guaranteed return and security.

Positives

• The agreement provides Meritz with a guaranteed return on its investment through the XIRR clause.
• The additional security in the form of Paref SA shares mitigates risk for Meritz.
• The agreement clarifies the conditions under which Meritz can withhold consent to Share Top Ups, providing more certainty for both parties.
• The reimbursement of expenses up to US$100,000 covers Investor's costs.

Negatives

• Lanvin Group is obligated to use funds to repurchase shares, potentially limiting capital available for operations or growth.
• The Coverage Ratio clause could force Lanvin Group to purchase additional shares at potentially unfavorable terms.
• The agreement requires Lanvin Group to deposit Paref SA shares as security, potentially limiting flexibility with those assets.
• Failure to make payments under Clause 1 or deposit Paref Shares under Clause 3 constitutes an Event of Default under the ARRA.

Risks

• A decline in Lanvin Group's share price could trigger additional share purchases to maintain the Coverage Ratio.
• Delays by Custodian Bank in depositing Paref Shares could lead to a breach of the agreement.
• Failure to agree on objective criteria for withholding consent to Share Top Ups could lead to disputes.
• Failure to make payments under Clause 1 or deposit Paref Shares under Clause 3 constitutes an Event of Default under the ARRA.

Future Outlook

The agreement outlines a series of share repurchases and security adjustments scheduled through August 2024, with potential for additional share purchases based on the Coverage Ratio.

Industry Context

Such agreements are common in corporate finance to manage risk and provide returns to investors while allowing companies to maintain operational flexibility.

Comparison to Industry Standards

• The use of a Coverage Ratio and XIRR to determine share repurchase prices is a relatively standard practice in structured finance agreements.
• Similar agreements can be seen with companies like Silver Lake and their investments in technology companies, where downside protection and guaranteed returns are often key components.
• The security arrangements, such as pledging Paref SA shares, are also common in deals where investors seek additional collateral to mitigate risk.

Stakeholder Impact

• Shareholders: The share repurchase may impact the share price and potentially dilute ownership.
• Creditors: The agreement adds to Lanvin Group's financial obligations.
• Meritz Securities: The agreement provides a guaranteed return and additional security for their investment.

Next Steps

• PubCo to purchase shares from Investor according to the schedule in Clause 1.1.
• PubCo to purchase additional shares from Investor if the Coverage Ratio is below 150%.
• PubCo to procure the deposit of 678,081 common stocks of Paref SA into the Charged Securities Account or the Paref Shares Charged Securities Account no later than 21 May 2024.
• Investor and PubCo shall use reasonable best efforts to agree in writing on objective criteria or circumstances under which it shall be deemed reasonable for Investor to withhold its consent to a Share Top Up or a combination of Cash Top Up and Share Top Up under, and for the purpose of, Clause 6.2(b) and Clause 6.2(c) of the ARRA.

Key Dates

Keywords

share repurchase, Meritz Securities, Coverage Ratio, Paref SA shares, XIRR, underwriting fees, Event of Default, ARRA, Lanvin Group, security agreement