Singapore's GLP Group and the well-known Fung family in Hong Kong have reportedly teamed up to take the global merchandise supply chain management company Li & Fung private in a deal estimated to be worth around HK$7.225 billion.
The Fung family, through their company Golden Lincoln, and GLP Group has offered to buy out Li & Fung's shares at a 150 percent premium. All of the 5.78 billion shares of the 114-year-old company will be purchased at a rate of around HK$1.25 each.
Li & Fung's shares in Hong Kong skyrocketed during Monday's opening, reaching levels that were more than double its Friday's close of HK$0.50 per share. Opening prices on Monday were set at HK$1.04 per share, still lower than the two companies' offer to take it private.
In a filing with the Hong Kong Stock Exchange after the markets closed on Friday, Golden Lincoln chief executive officer, Spencer Fung, who is Victor Fung Kwok-king's son, stated that given the economic uncertainties facing the markets, it would be better for them to implement their planned long-term transformation strategy away from the public equity markets.
Analysts have pointed out that Golden Lincoln and GLP are taking advantage of the stock market downturn and the economic situation to materialize their plans for Li & Fung. The two companies will want to privatize the supply chain management firm to avoid their plans from being influenced by independent shareholders and their short-term goals.
Li & Fung's board of directors have reportedly formed an independent committee to review the privatization offer and to make recommendation on how the company should proceed. Under the deal, the Fung family will have management control of the company by owning 60 percent of the voting shares. The Singapore-based global operator and investor in logistics, real estate, infrastructure, and finance will own the remaining 40 percent of the voting shares and 100 percent of the non-voting shares.
The offer to take the company private comes after Li & Fung had released their full-year earnings report. For 2019, the company reported net profits of around $17 million. This was a massive turnaround when considering the company's $13 million loss in 2018. Revenues for the year reached $11.4 billion, a 10.1 percent drop when compared to its revenues in the previous year.
Over the past couple of years, Li & Fung's operations had been heavily affected by the China-US trade war and the rise of e-commerce. The company is one of the world's biggest suppliers of consumer products, helping retail brands source products from thousands of suppliers and manufacturers from Asia. Apart from brokering deals, the company also provides production and logistics management for its customers.
