July 20, 2015
The deal between CVC Capital Partners and Chinese restaurant chain South Beauty is falling apart fast.
Representatives from the European private equity group are no longer members of the board at the restaurant chain founded by flamboyant Chinese entrepreneur Zhang Lan. CVC, which last year spent $300 million for an 82.7% stake in South Beauty, has not been involved in company management since at least June, according to a South Beauty statement.
Borrelli Walsh, a Hong Kong-based restructuring, insolvency, and forensic accounting company, was appointed to the board in June. The change will allow South Beauty to “benefit from an enhanced management focus and stable business operations,” it said in the statement.
CVC said in a note it had no comment to make.
The private equity group in March obtained a Hong Kong court order freezing the assets of Zhang Lan and two other respondents, Grand Lan Holdings Group Limited and South Beauty Development Limited.
Hong Kong High Court Justice Andrew Chung noted then that “very substantial sums had been paid by [CVC] and it is still unknown where those sums now are…Money is, of course, a relatively liquid form of asset.”
Zhang Lan, who opened the first outlet of South Beauty in China World Center in 2000, had a rosy start with CVC. When the CVC investment was finalized last year, Zhang said: “I regard the ‘South Beauty’ brand as my daughter. As founder of South Beauty, I have great sentiment attached to this brand, but I genuinely believe that this partnership will create a bright future for South Beauty in the years to come.”
South Beauty, which Zhang once envisioned as the “ Louis Vuitton ” of the global dining market, is struggling to restore its former glory. China’s sweeping crackdown on corruption and waste has turned bureaucrats and businessmen from high-end restaurants, as fancy dining places are now associated with an opulent lifestyle that is frowned upon by Chinese President Xi Jinping.
Zhang Lan, who resigned from South Beauty board in 2013, said yesterday in an interview with Chinese newspaper Jinghua Times that she would sue CVC for pledging her company shares as loan collaterals without first obtaining her approval.
South Beauty said it had no dealings with previous board members and wouldn’t comment on this matter.
Yue Wang, Forbes Staff