The company supplies consumer goods to department stores, hypermarkets, specialty stores, catalogue-led companies and e-commerce sites.
Hong Kong’s Fung family, alongside Singapore’s GLP Group, has made a HK$7.2b (US$928m) offer to privatise the 114-year-old global merchandise supply chain manager Li & Fung at a price premium of 150% to the stock’s last closing price, as they seek to take advantage of the worst economic and stock market downturn in a decade, caused by the coronavirus pandemic.
Golden Lincoln, controlled by Victor Fung Kwok-king and William Fung Kwok-lun, has teamed up with GLP, a global operator and investor in logistics, real estate, infrastructure and finance, for the privatisation. GLP will buy all the 5.78b shares not owned by the Fung family at HK$1.25 each. The family will reportedly not be buying any more Li & Fung shares.
“In light of global economic uncertainties, the company’s transformation will involve execution risk and the associated benefits will require a longer time to materialise,” chief executive Spencer Fung, who is also Victor Fung’s son, said in a filing to the Hong Kong stock exchange after market close on Friday. “The offerers believe that the transformation of the company will be more effectively implemented away from the public equity markets.”
After the privatisation, the Fung family will retain management control of Li & Fung by owning 60% of the voting shares, said Ed Lam, Li & Fung’s chief financial officer. 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 US$11.4b, due to continued destocking by customers, store closures and customer bankruptcies. In 2019, its core operating profit declined 22.9% to US$228m.