Dividend bonanza as Li & Fung sells three businesses for US$1.1b
Remaining US$580m in proceeds will allow the firm ‘more financial flexibility’ as it continues to execute its key three-year goal of building an end-to-end digital supply chain, says CEO Spencer Fung
Shareholders in the venerable Li & Fung Limited – the multi-faceted Hong Kong trading conglomerate started in 1906 – are set for bumper payouts after the firm announced it is selling its furniture, jumpers and beauty businesses to a consortium for US$1.1 billion, nearly half of which will be paid out as a special dividend to stockholders.
Li & Fung has been supplying high-volume, time-sensitive consumer goods for years from Hong Kong, acting as a global middleman for manufacturers, including global retail giant, Wal-Mart.
The buying consortium is 45 per cent owned by Hony Capital, a Chinese private equity firm controlled by Legend Holdings. Fung Holdings and Fung Investment, parts of the Fung Group, also own 45 per cent and 10 per cent in the consortium. Fung Group is the controlling shareholder of Li & Fung.
Agreement has been reached, it said, that Hony and its parent company Fung Group would purchase the units for US$1.1 billion, of which US$520 million will be paid as a special dividend, which translates into HK$0.476 per share – double its 2016 annual dividend of HK$0.23 per shares. Its shares closed at HK$4.08 on Thursday, up 3.29 per cent.
The remaining US$580 million in proceeds will allow the company “more financial flexibility” as it continues to execute its key three-year goal of building an end-to-end digital supply chain, said Spencer Fung, its CEO.
“It is a very strategic deal. The proceeds will allow the company to continue the simplification of its businesses and execute our three-year plan.
“Our first half results were solid and our customers and vendor partners are responding very positively to our new digital solutions. We are very excited to be creating a future supply chain that does not yet exist in the market.”
Net profit rose 39.6 per cent to US$101 million in the first six months
John Zhao, chairman and CEO of Hony and executive vice-president of Legend Holdings, said he was looking forward to working with the management teams of the businesses being sold, and sharpening their distinct strategies.
“With our value-added services, their future success lies in going deeper into their respective product categories.” he added.