Li & Fung

Hang Ten soars on HK$2.65b buyout bid

PUBLISHED : Wednesday, 21 December, 2011, 12:00am
UPDATED : Wednesday, 21 December, 2011, 12:00am


Related topics

Shares of apparel retailer Hang Ten surged to a 12-month high yesterday on news of a takeover bid by Victor Fung Kwok-lun and his brother William, owners of trading firm Li & Fung.

The stock jumped 95 HK cents, or 55.88 per cent, to HK$2.65 yesterday, edging closer to the cash offer of HK$2.70 per share. The offer values Hang Ten's more than 982 million shares in issue at HK$2.65 billion.

The buyout is being conducted through the Fungs' privately owned Li & Fung Retailing. The brothers said the Hang Ten group's brands - which include Hang Ten, Arnold Palmer and H&T, would help the company expand into retail casual fashion.

Hang Ten's controlling shareholders, garment maker and retailer YGM Trading and Dennis Hung Ging-kong and his family, will sell a combined 69.9 per cent stake to Li & Fung. The deal will result in a HK$340 million one-off gain to YGM.

YGM shares yesterday rose HK$1.20, or 6.83 per cent, to close at HK$18.76.

However, YGM said it was trying to regain 8.2 million missing Hang Ten shares, or 0.83 per cent of the issued share capital, from an undisclosed law firm. The shares were placed with the firm in 2003 but were found to be missing in August.

The law firm is co-operating in their recovery, but it is uncertain when and how many shares will be returned.

If the shares are recovered, YGM says, it will realise up to HK$600 million for its 21.81 per cent of Hang Ten.

Hung and his children, who together own 47.26 per cent of Hang Ten, are responsible for the operation of the company.

Some brokers said the sale reflected heavy competition in fashion retailing and rising pressure on wages and rents.

'Hang Ten may save procurement costs with the supply chain services of Li & Fung group,' said Francis Lun Sheung-nim, managing director of securities investment firm Lyncean. 'Retailing is very challenging and competitive, very few retailers succeed.'

Despite yesterday's share price rise, Li & Fung said it would not increase its bid. The offer price is at a 58.8 per cent premium to Hang Ten's closing price on December 15 of HK$1.70 and a 54.3 per cent premium to its average close in the 30 trading days to December 15.

Li & Fung is part of the Fung family's supply chain empire, which is unrelated to any publicly traded entities such as Li & Fung Ltd, Trinity, Circle-K convenience stores and Convenience Retail Asia.

The Fungs said the Hang Ten deal would expand their retailing network from the current 1,100 stores in China, Korea, Singapore, Malaysia, Thailand, Indonesia and other Southeast Asia countries.

Hang Ten operates about 800 stores across Southeast Asia. It posted a post-tax profit rise of 69.36 per cent to HK$239.06 million in the year to March 31.