Fung family, GLP Group offer to privatise supply chain manager Li & Fung

Hong Kong’s Fung family, GLP Group has offered to privatise global supply chain manager Li & Fung at 150% premium.

Hong Kong’s Fung family and Singapore’s GLP Group have made a *HK$7.2bn ($928m) offer to privatise 114-year-old global merchandise supply chain manager Li & Fung at a price premium of 150%, as they seek to take advantage of the stock market downturn caused by the coronavirus pandemic.

Golden Lincoln, controlled by Victor Fung Kwok-king and William Fung Kwok-lun, has teamed up with GLP for the privatisation. GLP will buy all the 5.78bn shares not owned by the Fung family at HK$1.25 each. The family will not be buying any more Li & Fung shares.

“In light of global economic uncertainties, the company’s transformation will involve    […] risk and the associated benefits will require a longer time to materialise”, said chief executive Spencer Fung.

Spencer Fung said the Li & Fung board had established an independent committee to make a recommendation to independent shareholders on the offer. After the privatisation, the Fung family will retain management control of Li & Fung by owning 60% of the voting shares. GLP will own 40% of the voting shares and 100% of the non-voting shares, resulting in an “effective economic ownership” of 67.67%.

The offer comes after Li & Fung unveiled a US$17m net profit for last year, a turnaround from a loss of US$13m in 2018. Its revenue fell 10.1% from 2018 to $11.4bn, due to continued destocking by customers, store closures and customer bankruptcies. Its core operating profit declined 22.9% to $228m.

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The US-China trade war saw China sourcing fall to 43% of its total procurement from 50%, as buyers shifted their purchases to other countries in Asia to avoid tariffs. Li & Fung’s share price closed at 50 HK cents on Friday, at a fraction of a peak of about HK$25.5 in early 2011. It has been hurt by the proliferation of e-commerce, which has seen many of the West’s biggest retailers close physical stores, reduce inventories and shorten product delivery lead times to reduce costs.

GLP operates 62m sq m of global logistics assets – mostly in China, Brazil, India and Japan – and more than $89bn in assets. Its shareholders include GLP’s chief executive, Ming Mei, HOPU Logistics Investment Management, Vanke Real Estate (Hong Kong), Bank of China Group Investment and Hillhouse Capital Logistics Management.

Source: SCMP

*$: HKD7,64 / €: HKD8,23

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