By  on February 6, 2006

LONDON - Sir Paul Smith has a brand new business partner - his longtime Japanese licensee Itochu.

In an unexpected move, the designer's wife, Pauline Denyer Smith, and his managing director, John Morley, have sold their combined 40 percent stake in the company to Itochu for an undisclosed price.

Smith, who has declined all comment on the sale, still holds a 60 percent stake in the company he founded some 30 years ago. Itochu has also declined to comment.

"Nothing is changing," a Paul Smith spokeswoman said. "Everything is status quo." A joint statement from Paul Smith Ltd. and Itochu said Smith "fully intends to retain his shares for the long-term and remain as designer and chairman." Morley will continue in his role as managing director.

The statement also thanked Denyer Smith, calling her contribution to the company "immeasurable."

It's unclear exactly why Denyer Smith and Morley decided to sell now.

Industry sources close to Smith said the sale was not made to fuel the company's expansion, but rather for personal reasons and lifestyle issues.

As reported, Smith is making a big push in North America, and has recently opened a 5,000-square-foot flagship in Los Angeles. He also plans to open a 5,000-square-foot space in SoHo in Manhattan and a Paris flagship later this year.

Smith's New York store at 108 Fifth Avenue is his most profitable store worldwide - although it only sells men's wear. He's also doing a vigorous men's wear business at Neiman Marcus, Barneys New York and independent specialty stores.

Smith's global wholesale turnover is $465 million, with 54 percent coming from men's wear, 28 percent from accessories, 14 percent from women's wear and 4 percent from shoes. Smith's direct sales are $175 million.

Profits in the year to June were $26 million, and the company has no debt.

In the U.K., Smith has 16 stores and owns all of the retail property. He recently opened a home interiors and accessories shop on London's Albemarle Street and a small boutique near Borough Market.

Smith has always been fiercely proud of his independent business, and resisted selling all or part of the company even during the fashion mergers-and-acquisitions frenzy of the late Nineties. At one point during the decade, he flirted with the idea of selling, and retained Morgan Stanley as an adviser. But he decided to remain independent and, last November, told WWD that he had no plans to sell the company."At the moment, we're happy to stay as we are," said Smith, whose net worth has been estimated at 180 million pounds, or $317 million, by the London Sunday Times Rich List. "There is no plan at the moment to sell to anyone, but if we eventually do sell, it will be to an unlikely candidate. One who is passive and long-term."

With typical cheekiness, he added: "I've pulled the drawbridge up, and put the crocodiles in the moat."

Smith, who will turn 60 this year, has also attributed his long-term commitment to his company to his birth sign. "I was born under the sign of Cancer - and Cancers cling onto things," he said.

Smith has been in business with Itochu, the Japanese trading and textile giant, for more than 20 years. Geographically, 53 percent of his business comes from Japan, where his main partners are Itochu for men's wear and Onward Kashiyama for his women's wear. Over the years, Japan has been a huge focus for Smith, who has become something of a cult figure in the country.

Next month, he will open his first shop in Tokyo that will carry his full range of men's wear, women's wear and accessories. The new store, which has a bamboo garden in the back, will be called Space.

Itochu Corp.'s core business is textile manufacturing. The $89 billion company is a licensing, import and distribution partner to a host of luxury and fashion brands including Lanvin, Tommy Hilfiger, Vivienne Westwood, Bally, Bulgari, Wolford, Elie Tahari and Levi's.

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