Major shareholders of local supply chain manager and retailer Li & Fung (0494) announced to privatize the company at a total of HK$7.22 billion amid a weakening offline retail industry and economic headwinds.
Major shareholders of the company, including chairman William Fung Kwok-lun and honorary chairman Victor Fung Kwok-king, plan to privatize the company's equity at HK$1.25 per share, a 1.5 times premium over the closing price of HK$0.50 today. The cancellation price also represents an 8.2 percent premium to the audited consolidated net asset value per share of HK$1.155 as of the end of last year.
Founded in 1906 and listed in 1973, shares of the company have dived from a peak of HK$25.98 in 2011, when its market value totaled over HK$200 billion.
The listing of the company's shares on the Stock Exchange of Hong Kong will be withdrawn with effect immediately following the effective date of the privatization, said the company in a statement.
In light of digital disruption to the retail industry, the company has undertaken restructuring efforts to reposition its businesses and to improve its competitive advantage, it said.
"Although the company has implemented a number of strategic changes to adapt to shifting market dynamics, the company’s financial performance remained under pressure."
Meanwhile, the continuing economic headwinds are having a significant adverse impact on the company’s business activities, said Li& Fung.
Li & Fung posted a net profit of US$16.75 million (HK$130.65 million) for last year, compared with a US$13.31 million net loss a year ago, expecting the Covid-19 pandemic will cause major uncertainty for 2020 and beyond.
Core operating profit declined by 23 percent year-on-year to US$228 million. Basic earnings per share from continuing operations were 1.6 HK cents, and no final dividend was declared.
Revenue slid 10 percent from a year ago to US$11.4 billion, due to continued customer destocking, bankruptcies and store closures, as well as customer turnover in supply chain solutions business and exit from non-strategic customers, said the company.
The Covid-19 virus outbreak has caused a major disruption in the global supply chain, and the restricted international travels and flow of goods have made it more difficult for customers to source products and made the supply chain significantly more complex, said Li & Fung.
