On acquisition spree in distribution
Hong Kong-based Li & Fung Ltd (consumer goods export and logistics group, see also TextileFuture e-paper last December issue) has acquired the children apparel and toy business in Greater China from The Roly Group in September 2011 but the deal was only confirmed a few days ago.
The acquired business has achieved 2011 net proceeds in the order of US 70 million. Total purchase consideration for this acquisition amounts to around USD 41 million and the transaction covers wholesaling, retailing and sourcing of children clothing and toys business in mainland China, Hong Kong and Macau. The portfolio consists of international brand licenses from Disney (Mickey and Winnie the Pooh, Elle and Sesame Street. It is the first acquisition of 2012 for LF Asia after the expansion of its distribution business to Asia in 2011.
LF Asia sees in the acquisition a strengthening of LF Asia’s brands and licensing portfolio and an enhancing of the global presence in all areas, from design, licensing, sourcing and logistics to expand its business into new markets and product categories, including the important children’s market place in China. It represents a significant stride in the intentions to achieve the goal of expanding the distribution business and allows the possibility to further penetrate the considerable potential of the Chinese markets as well it proves that Li & Fung is able to take brands from the U.S. and Europe and secure their global distribution.
Li & Fung announced also that LF Asia has entered into an agreement with LiFung Kids (Holdings) Ltd, a subsidiary of Li & Fong Ltd. to divest the apparel retailing business acquired from the Roly Group to LiFung Kids (ecxlusive retail distributer for certain branded children’s apparel, children’s footwear and other related products, certain retail stores, catalogue business an mail order channels, e-commerce platforms or sales websites to retail customers in Hong Kong, China and Macau) in the approximate value of USD 17.8 million. The transaction is subject to adjustment (up- or downwards) with reference to the net tangible assets provided that the final sum will not exceed USD 26.7 million. In case there are stores which have not been transferred to LiFung Kids, LF Asia shall provide assistance – at no additional fee – to the seller to continue to sell the products by LiFung Kids in such stores. At the same, it will allow Li Fung Kids to collect net sale proceeds of these stores and recompense LiFung Kids after deducting the related store expenses and selling price of goods to LF Asia. The sub-lease arrangement and the distribution and sale of goods agreement is ending December 31, 2014 at preset pricing. The key brands include Xiaozhuren and Toonsland. The apparel retailing business was not profitable and provided losses in 2010 and 2011. The original acquisition cost of this business amounted to around USD 17.8 million.
After the announcement of these transactions the share value of Li & Fung traded at the Hong Kong Exchange increased considerably.