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.
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 $89bn in assets. Its shareholders include GLP’s chief executive, Ming Mei, HOPU Logistics Investment Management, Vanke Real Estate (Hong Kong), Bank of China Group Investment and Hillhouse Capital Logistics Management.
*$: HKD7,64 / €: HKD8,23