Chinese private equity firms to take shoe giant Belle International private for US$6.8 billion

Hillhouse Capital teams up with CDH Investments and two Belle executives to buy out the company, for HK$6.30 per share

PUBLISHED : Friday, 28 April, 2017, 9:15pm
UPDATED : Friday, 28 April, 2017, 10:49pm

Two top Chinese private equity firms have offered to take Belle International – the country’s largest shoe retailer – private, in a takeover deal valued at HK$53.1 billion (US$6.8 billion).

Hillhouse Capital Group, an investor in Tencent and Midea among others, has teamed up with CDH Investments and two Belle executives to buy out the company, at HK$6.30 per share, which represents a 20 per cent premium to its previous closing price, according to a statement on Friday to the Hong Kong stock exchange. Its shares were suspended on April 18, pending release of the announcement.

If completed, the acquisition – which the buyers said is intended to bring strategic changes to the ailing retailer – will become China’s largest retail deal of the year so far.

Founded in Hong Kong, Belle built itself from a small outlet in the city’s Yau Ma Tei district to an Asian shoe retailing empire which sells top brands including Staccato, Joyce & Peace and Mirabell.

But the company has been hit hard by online competition over the past five years, as struggling bricks-and-mortar department stores remain its primary sales channel.

After several failed attempts to reinvigorate the business, the company has seen 13 straight quarters of same-store sales declines.

“Belle International is at a critical moment and needs to be transformed,” said Sheng Baijiao, the retailer’s chief executive.

“It has become clear our traditional retail business model is in urgent need of integration with the digital economy.”

Belle same store sales hurt by growth in China e-commerce

The buyers have suggested that privatising the shoemaker will allow them to “more effectively” carry out a business revamp, which will involve exploring new business models and technology investment.

Hillhouse has invested in an array of tech giants, including Baidu, Tencent, JD.com, Meituan, and Airbnb, while CDH – founded by a group of former CICC private equity unit executives – has been a key pre-IPO investor in Belle since the 2000s.

Other listed consumer titans backed by CDH include Mengniu, WH Group and Midea.

“Belle is still the top performer among fashion footwear companies, but the industry as a whole is in a tight spot, especially those reliant on physical channels,” said Tang Xiaotang, founder of retail consultancy Nofashion. “Given Belle’s market leading position, I think it is a little undervalued.”

Apart from small brands thriving on online marketplaces such as Tmall, fashion footwear giants led by Belle and Daphne are also being squeezed by Western athletics goods makers.

As Chinese people increasingly seek healthier lifestyles, Nike and Adidas have grown their market shares to a combined 11 per cent in China’s US$55 billion footwear market, compared with the 2.5 per cent held by Belle, according to market researcher Euromonitor.

Belle said earlier it anticipated its profit for the financial year ended February 28 to tumble as much as 25 per cent, dragged down by sluggish sales.

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