Reports of HK$6.7 billion windfall push shares of Nike supplier Yue Yuen to historical high
Company’s stock rises by 20 per cent to HK$38.4 before closing at HK$38.15
Shares in Yue Yuen Industrial Holdings, the world’s largest footwear maker and manufacturer of Nike and Adidas shoes, rose to a historical high on Monday after the company announced it would receive HK$6.7 billion (US$860 million) from the proposed privatisation of its retail arm.
The company’s share price rose by 20 per cent to HK$38.4, the highest level for the manufacturer since its listing in Hong Kong in July 1992, before dropping slightly to close the day at HK$38.15.
The rally came after it announced on Sunday that it would receive the HK$6.7 billion windfall by selling its entire 62.41 per cent stake in its Chinese footwear retail unit, Pou Sheng International Holdings, to its Taiwan-listed parent Pou Chen Corporation as part of a HK$10.9 billion privatisation plan.
“Yue Yuen has said it plans to deliver part of the windfall in a special dividend to shareholders, which has led investors to chase the stock for its potential dividend,” said Jeffrey Chan Lap-tak, the founding partner of Oriental Patron Financial Group.
Pou Sheng International’s share price also rose by 31 per cent to a one-year high of HK$2.02 on Monday morning, which is close to the price offered by Pou Chen – HK$2.03 per share – to all shareholders as it buys back their stock to cancel Pou Sheng International’s listing status. It closed on Monday at HK$1.99, up 29 per cent.
Pou Chen, a Taiwanese manufacturer that also owns a 49.99 per cent stake in Yue Yuen, said on Sunday its privatisation plan would allow Pou Sheng International to be more flexible in developing a new business model to fend off competition from e-commerce channels and other rivals.
“Traditional retailers such as Pou Sheng International are facing a lot of competition, as many youngsters now shift to online shopping. This was why its share price was not doing well previously. Its major shareholder, Pou Chen, however considers the assets and prospects of the company as good so it proposed the privatisation plan,” said Oriental Patron’s Chan.
“The share price shows investors consider the offer price as reasonable,” he added.
Yue Yuen, owns factories in China, Vietnam and Indonesia, and produces 300 million pairs of shoes a year for Nike, Adidas, Reebok, New Balance, Puma and Timberland.
Pou Sheng International is a retail arm spun off from Yue Yuen in 2008. The retailer in January last year sacked CFO Chen Luo-leng, while chief executive Kwan Heh-Der resigned, after an internal investigation found incorrect sales records a month earlier, according to its filing at the stock exchange in Hong Kong.