Li & Fung sells its Asia consumer and healthcare distribution business to DCH for US$350 million

PUBLISHED : Tuesday, 03 May, 2016, 7:59pm
UPDATED : Tuesday, 03 May, 2016, 8:05pm

Li & Fung, the Hong Kong sourcing company that supplies clothes and toys to US retailers like Wal-Mart Stores, has agreed to sell its Asia consumer and healthcare distribution business to Dah Chong Hong Holdings (DCH) for US$350 million in cash.

The move to divest is part of Li & Fung’s three-year strategy of simplifying its overall business to drive organic growth and allow the company to focus on its core businesses of trading and logistics.

On Tuesday, Li & Fung said it had inked an agreement with locally-listed DCH over the sale of LF Asia Distribution, adding that the deal is expected to close by the end of June.

“LF Asia Distribution has more than 40 years’ history and ranks amongst the leading consumer and healthcare distributors in Greater China and Southeast Asia,” said William Fung, chairman of Li & Fung.

DCH said in a filing with the Hong Kong stock exchange on Tuesday that the acquisition would expand the firm’s consumer business.

“The company’s enlarged consumer products portfolio will boast a range of leading food, personal care and healthcare brands,” the company said in a statement.

DCH, a majority-owned subsidiary of CITIC, is a distributor and dealer of motor vehicles in Greater China. Its consumer business distributes food, personal care and lifestyle products. Established in 1949, DCH has business operations in Hong Kong, mainland China, Taiwan, Macao, Singapore, Japan and Myanmar.

It said it would enhance its position in high-growth markets in Southeast Asia.

DCH said it would immediately create a Pan-Asian business that would leverage its increased distribution and logistics channels to further enhance the services provided to brand owners.

“Our business is highly complementary to our own and we look forward to working together as we grow our combined businesses,” said DCH chairman Zhang Jijing.

Under the terms of the agreement, DCH will acquire the fully operational business of LF Asia Distribution, which will continue to operate as a separate, independent entity for the first year and its employees will become employees of DCH upon closure.

The agreement does not cover Li & Fung’s logistics and beauty businesses.

DCH said it intends to finance the acquisition with cash and external financing.

Shares of Li & Fung fell 1.3 per cent to close at HK$4.75 yesterday, while DCH up 2.2 per cent to close.