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SCMP Reporter

GARMENT king Jimmy Lai Chee-ying is severing his involvement with the China boutique business he launched, which at times found itself in confrontation with mainland authority.

   His route out is through the $312 million sale of a stake in Tiger Enterprises - most of which goes to Mr Lai - the clothing subsidiary of Giordano International, the listed casual-wear retail chain.

  Giordano is 35 per cent owned by Mr Lai and has been active in China through Tiger Enterprises, in which it has a 51 per cent stake.

  Mr Lai holds 47.5 per cent of Tiger's stock while the remaining 1.5 per cent is divided equally between two directors of Giordano and a minority shareholder.

  The three are Chan Kui-tim, Peter Lau Kwok-kuen and Alan Au Chi-keung.

  In mid-August last year, a cornerstone of Mr Lai's clothing empire, Giordano's franchise outlet in Beijing was ordered by authorities to close.

  Media speculation connected the closure to a critical article written by Mr Lai about Chinese premier Li Peng in Next magazine.

  Since then, Giordano's share price has been under pressure and its Chinese partner, Chinese Resources sold its shares in Giordano.

   Mr Lai stepped down as chairman of the company in a bid to play down his personal influence on the company's business in China.

  But the directors in a press release said they were not aware of any alleged restrictive measures implemented by Chinese authorities.

  'Both Tiger and Giordano are enjoying a normal working relationship with the relevant Chinese authorities,' the release said.

  'It is not expected that the company will have any difficulty in continuing its expansion strategy by opening more franchised stores or renewing existing franchise agreements in China.'   The proposed reorganisation put forward by Giordano says Mr Lai and three others have agreed to sell their 49 per cent stake in Tiger to Giordano for up to $312 million.

  The transaction depends on Tiger making a net profit of at least $51 million for the year to December this year.

   Should it fall to less than 50 per cent of the forecast, Mr Lai and the three other shareholders will make proportional compensation to Giordano.

     Tiger has a direct interest in co-operative joint venture Shenzhen Tiger Garment through which it markets Giordano's products through six managed stores in Shenzhen, Guangzhou and Dongguan areas and 55 franchised stores in major cities in China.

  For the six months to June 30, Tiger recorded a net profit of $16.6 million. At the end of 1994, its profit stood at $22.1 million on turnover of $338.5 million.

 A company statement said the proposed reorganisation would enable the company to 'capture fully the future expected growth of Giordano's apparel franchising and retailing business in China'.

  The acquisition price represents a prospective price-earnings multiple of 8.5 times.

  Tiger has made cost-saving moves in China to further improve margins, including streamlining the organisational structure and the replacement of Hong Kong personnel with trained local staff.



Lai cuts China fashion link