How tycoon Silas Chou made a fortune from two global brands

Ko Tin-yau November 08, 2016 18:26

Textile and fashion tycoon Silas Chou (曹其峰), along with his close friend and business associate Lawrence Stroll, had in the past made the now popular clothing brand, Tommy Hilfiger, rise from the shadows.

The Hong Kong tycoon was also an early investor in Michael Kors. But he has sold all his shares in the affordable luxury brand and reaped a profit of over HK$10 billion.

Silas hails from a renowned family of textile manufacturers. His father Chao Kuang-piu (曹光彪) was in the textile business. The family helped the then 34-year-old American fashion designer Tommy Hilfiger to build his own brand in early 1980s.

Offering a one-stop production service, it enabled the brand to extend its reach worldwide.

In 1989, Chou teamed up with Lawrence Stroll and formed Sportswear Holdings to acquire Tommy Hilfiger Corporation.

Following the acquisition, Tommy Hilfiger was listed on the New York Exchange in 1992. Being the major shareholder, Chou served as the company chairman.

After growing the business substantially, the businessman sold all his shares in 2006 to UK private equity firm Apax in a US$1.6 billion deal.

Apax sold the brand four years later to US retail apparel giant Phillips-Van Heusen for US$3 billion. Last year, Tommy Hilfiger generated worldwide sales revenue of US$6.5 billion, making it one of the top ten US fashion brands.

The other most significant milestone in Chou's career was the acquisition of Michael Kors Corporation. The creator of the company, Michael Kors, was good at designing sportswear fashion but not very adept at running the business.

Some bad decisions led to the company being on the verge of bankruptcy. It was then that Silas and Stroll acquired a majority stake in 2003 for US$100 million.

The duo reinvented the company as they did with Tommy Hilfiger. They decided to restructure the business to target the affordable luxury market, cutting the product prices to around US$300 from several thousand dollars in the past.

Also, the company expanded into the very profitable handbag business. Chou took Michael Kors public in 2011 and by 2014 the valuation of the company had gone up to a peak of US$20 billion.

But then the Hong Kong businessman, as in the case of Tommy Hilfiger, decided to exit the company and sold the shares through a secondary offering.

However, Chou continued to control Michael Kors (HK) Ltd., the agent for Michael Kors in the Greater China region, which has been the main growth engine for the brand in recent years.

In June this year, the businessman sold the agent company to Michael Kors for US$500 million. With the deal, coupled with his earlier stake sale, Chou has had a return of more than ten times on the US$100 million investment he made in Michael Kors in early 2003.

Ying Lee-yuen, another Hong Kong billionaire and former chairman of Esprit Holdings (00330.HK), has done the same thing.

The businessman helped the then little-known US fashion brand Esprit expand into markets worldwide, leveraging on production, procurement and distribution networks in Hong Kong in the 1970s.

Ying took the company public and then disposed his shares gradually, making a profit of up to HK$20 billion.

Hong Kong businessmen are quite savvy when it comes to leveraging the city's strengths and connecting with overseas markets.

Chou has generally kept a low profile and not made many public appearances. However, his wealth is estimated at over US$2.7 billion, putting him at No. 23 among Hong Kong's super-rich, according to Forbes.

This article appeared in the Hong Kong Economic Journal on Nov. 7

Translation by Julie Zhu

[Chinese version中文版]

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Ko Tin-yau

Hong Kong Economic Journal columnist