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SCMP Reporter

A DISASTROUS investment in an American retailer of women's clothing has cost one of Hongkong's best-known garment-making families control of one of its stock market vehicles, YGM International.

  The Chan brothers, who currently hold 48.91 per cent of YGM International's shares, are effectively selling the company to two businessmen in a two-part deal.

  A private company owned by the Chan brothers is being paid $61.68 million in cash to remove the debts from the US retailing venture and many of the firm's other activities. They will relinquish their directorships.

  The Chan brothers will then sell all their shares in YGM International to Mr Tang Sung-ching and Mr Tse Muk-choi, who will then control the listed company.

  According to a statement yesterday, Mr Tang owns a garment manufacturing business in Hongkong and China and has property interests in the US, Hongkong and China.

  It also said Mr Tse's business interests are in trading and property development in Hongkong and China, and that he has secured rights to operate bonded warehouses in Zhuhai and three other mainland cities.

  However, it contained no information about the future direction of the company or whether asset injections were planned.

 The statement said the new directors would ''formulate suitable business plans and strategy'' only after taking full control of the company.

  YGM International is one of the three listed companies in the Yangtzekiang Garment Manufacturing group, and it contains most of the group's overseas business.

   It was floated in Hongkong in January 1988.

  In April 1990, it spent US$5.5 million to buy Madison's of Columbus, a company which at the time had 23 shops selling women's clothes, mostly in the state of Ohio.

   At the time, YGM International said the deal would be a first step in a substantial US network selling YGM products.

  But hit by falling consumer spending in the US, Madison's went into Chapter 11 bankruptcy in June.

   By the end of financial year ending March 1992, YGM International had already written off HK$144.8 million for its US operations.

  It has since been told it must inject HK$22.5 million into its US subsidiary or be considered in default of a US$8 million loan which would then have to be repaid immediately.

  A fund-raising exercise the company had planned would ''not be an appropriate avenue'' in the current ''somewhat volatile investment climate now prevailing'', the statement said.

  Rumours of a change of control, possibly to a mainland concern wanting a so-called backdoor listing, sent the company's shares rocketing from around 28 cents to 75 cents on November 15, after which they were suspended.

  Under the deal announced yesterday, a general offer for YGM shares held by minority shareholders will take place at 84 cents, to be made by Society Generale on behalf of Wedlake, the investment vehicle 60 per cent owned by Mr Tang and 40 per cent by Mr Tse.

  The company has requested its shares start trading this morning.

  A Chan family vehicle known as Sevenoaks will acquire the operations in Malaysia and Singapore, its investments in other listed parts of the YGM group and some other assets.

  Sevenoaks will also take over the troubled US operations, including Madison's and the associated loans, and the Chan family will then give up control of the listed company.

  The cost of the deal to Mr Tang and Mr Tse will depend on the number of independent shareholders accepting the offer.

   The cost of the general offer would be $91.5 million if all shareholders accepted.

  Mr Tse and Mr Tang have told the stock exchange they will attempt to keep at least 25 per cent of the shares in public hands.

        The listed company will retain some of the successful US operations, including two industrial buildings in Seattle and a 49 per cent share in two other industrial buildings in the same city, with an audited market value in November 1992 of US$6 million.

  The listed company will also retain a 41.25 per cent share in YGM Tomen, a garment wholesaling business operated in France with local and Japanese partners.



Nailed by disastrous US retail investment