Bagir Group Ltd (LON:BAGR) said it will take legal action against the Shandong Ruyi Group for breach of contract.
The Chinese fashion conglomerate, once touted the “LMVH of China” but now drowning in billions of debt, was meant to buy a 53.7% stake in Bagir for US$16.5mln.
Last June, the two companies extended the completion date by nine months, with the new deadline set at next 31 March.
As part of the transaction, Shandong Ruyi had committed to providing US$1.3mln worth of equipment to Bagir’s Ethiopian factory by September 2019.
However, the goods have not been delivered as of Friday, so the AIM-listed tailor is taking the Chinese giant to court.
It is yet another headache for Shandong Ruyi, which has recently been added to a cotton supply blacklist as it failed to compensate a Bangladeshi group following an arbitration case.
The giant has been acquiring US$4bn worth of brands, including Sandro and TM Lewin, with debt growing three-fold over six years to £3.6bn.
In the same update, Bagir said it continues to generate “good sales growth” and expects to return to positive adjusted earnings (EBITDA) in the year to 31 December, against a US$1mln loss in 2018.
Shares dropped 2% to 0.59p on Friday morning.