Convertible deal gets Li Ning running
Li Ning Company, one of the largest sportswear retailers in China, rose sharply yesterday after selling HK$922 million of convertible bonds to investment firm TPG and the sovereign fund of Singapore.
Li Ning shares rose 8.5 per cent, its biggest intraday gain in seven weeks, to HK$7.29 yesterday against a 0.8 per cent gain in the Hang Seng Index.
The Beijing-based company, which has recorded declining orders since last year, expects to use the funds for brand development, sports sponsorship, research and design, new stores and working capital.
According to the deal, TPG, a Texas-based private equity firm, agreed to buy HK$690 million of bonds and will have the right to nominate two directors to Li Ning's board. In addition, TPG will buy 53 million ordinary shares from Li Ning, the sportswear company's founder and chairman.
Meanwhile, the Government of Singapore Investment Corporation (GIC), will acquire HK$232 million of convertible bonds.
The five-year bonds pay 4 per cent interest a year and can be converted to shares after six months for HK$7.74 each.
'The two investors have extensive experience in the investment field and retail sector,' said Li Ning, the Olympic gold-winning gymnast.
'I hope our management will fully tap into TPG's expertise and resources to drive the successful transformation of the company for our long-term development.'
Stephen Peel, Asia managing partner at TPG, said that the company will help Li Ning develop its business and brand further in the fast growing China market. Both investors declined to comment further.
Upon completion of the deal, Li Ning will remain the largest single shareholder of the company with an equity stake of 23 per cent. TPG will hold about 12 per cent, and CIC with have 8 per cent.
Li Ning's net income plummeted 49 per cent in the first half of 2011 from a year earlier to 294 million yuan (HK$362 million) as costs and competition increased. It expects revenue for 2011 to decline by 6 to 7 per cent.
