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Li & Fung divests three verticals for $1.1 billion
Dec '17
Li & Fung divests three verticals for $1.1 billion
Li & Fung Limited, the world’s leading supply chain solutions partner for consumer brands and retailers, has announced it has entered into a strategic transaction for Hony Capital and the Fung Group to acquire three of Li & Fung’s product vertical businesses: sweaters, furniture, and beauty, for an estimated cash consideration of $1.1 billion.

The product verticals were created in 2015 to consolidate some of the trading businesses of Li & Fung in specific product areas of sweaters, furniture and beauty. Further growth in these product categories necessitates expansion upstream and downstream, requiring capital investment and management attention, which the company believes is best achieved outside of Li & Fung and its present strategic direction.

This transaction continues Li & Fung’s strategy of simplifying its overall business and allows its senior management team to focus resources on its three-year plan (2017–2019) goal of creating the supply chain of the future to enable Li & Fung to deliver long-term shareholder value as it transforms into a digital company. This follows the spin-off of global brands in 2014 and the divestment of the Asia consumer & healthcare distribution business in 2016.

"The strategic divestment of the product verticals allows Li & Fung to focus on its core competencies and further strengthens our capital structure. The $1.1 billion proceeds will allow us to pay a generous dividend to our shareholders and the remaining $580 million of cash will give us more financial flexibility as we continue to execute our three-year plan goal of building an end-to-end digital supply chain. Our H1 results were solid and our customers and vendor partners are responding very positively to our new digital solutions. We are very excited to be creating a future supply chain that does not yet exist in the market," Spencer Fung, Group CEO of Li & Fung, said.

"We look forward to working with the management teams of the product verticals to sharpen their distinct strategies. With our value-added services, future success lies in going deeper into their respective product categories," John Zhao, chairman and CEO of Hony Capital and executive vice president of Legend Holdings, said.

The Board announced its intention to pay a special dividend of $520 million per share conditional upon the divestment being completed. The remaining proceeds of approximately $580 million will provide Li & Fung with additional financial strength and flexibility to build the supply chain of the future. (RR)

Fibre2Fashion News Desk – India

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