Li & Fung delists from Hong Kong’s bourse after 28 years as supply chain manager is privatised while global trade roils
- Shares of Li & Fung were delisted today
- The majority of shareholders agreed at a May 12 meeting for Li & Fung’s controlling shareholders to take the company private, at HK$1.25 a share
Shares of Li & Fung, which rose 2.5 per cent to HK$1.24 two days before their May 15 trading halt, were delisted today from the local exchange, closing another chapter in the 114-year-old company’s history. The stock was listed in Hong Kong in July 1992.
“Today marks the start of a new journey for Li & Fung as we focus on achieving a fundamental transformation of our business,” said chief executive Spencer Fung, the great-grandson of Li & Fung’s founder in a statement. “Our commitment to our retail and supply chain partners remains as strong as ever.”
Li & Fung was founded in 1906 during the twilight of the Qing dynasty in southern China’s Guangzhou, then known as Canton. The two founders were porcelain merchant Li To-ming and English teacher Fung Pak-liu, who began their business by exporting ceramics, fireworks, handicraft and silk to the United States and Europe. They later became compradors for the British colony when Fung’s son opened Li & Fung’s first branch in Hong Kong in 1937.
In the subsequent decade, Li & Fung grew to become the world’s largest supply chain manager for consumer goods, helped by the acquisition of dozens of firms that own brands or have product design and sourcing expertise. But online shopping progressively eroded the market share and profitability of traditional bricks-and-mortar retailers – the core of Li & Fung’s customer base.
Management has embarked on a multi-year strategy to digitalise the supply chain management processes – spanning order processing, raw material procurement, samples production and approval, production, quality control, financing and logistics. But the effort could not match the pace of market shifts and was unable to stop its business volume and profit from sliding. Core operating profit fell to US$228 million last year, a quarter of the US$882 million in 2011, while revenue almost halved to US$11.4 billion.
Li & Fung told shareholders its business transformation, which requires “deeper restructuring” and further investment in technology, infrastructure and talent, would entail execution risk and the benefits will take a relatively long period to realise.
“The [take-private deal’s] offerer believes [this] will be more effectively implemented away from the public equity markets,” it said when it first unveiled the buy-out offer.
Some minority shareholders who opposed the deal felt betrayed. The take-private price, although more than double the 50 Hong Kong cents that the stock last traded at before the offer’s announcement, was a fraction of what they paid for, some shareholders said.
Chan said he is convening a concern group of minority shareholders to ask Hong Kong’s Securities and Futures Commission (SFC) to investigate whether Li & Fung’s May 12 shareholders meeting was conducted in accordance with regulations. A meeting has been scheduled on Thursday. The SFC and Li & Fung declined to comment.
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