It did not disclose the purchase price. In June, when Li & Fung signed a letter of intent to buy KarstadtQuelle International Services, analysts estimated that the takeover would cost about Euro100 million (HK$987.47 million).

The German retailer said it has also signed a contract with Li & Fung on future co-operation.

The transaction is subject to approval of the European competition authorities.

Helmut Merkel, a member of the management board of KarstadtQuelle who heads the retailer's purchasing, logistics and information technology operations, said that by 2008, Li & Fung would be handling on its behalf total direct sourcing volume of Euro2 billion.

Li & Fung raised HK$2.723 billion last month through a top-up share placement. Analysts at the time said the proceeds probably would be used for acquisitions.

Earlier, Li & Fung said it expected the KarstadtQuelle deal to boost its turnover in Europe to at least US$1 billion a year. It has been making purchases as part of a three-year plan to raise its annual revenue to US$10 billion by next year from US$6 billion last year.

Li & Fung recorded net profit of HK$764 million in the first half, up 24 per cent from a year earlier. Managing director William Fung attributed the gain to strong organic growth augmented by several successful acquisitions.

Earlier this year, Li & Fung acquired US apparel producer Oxford Womenswear Group for US$37.3 million and Rosetti Handbags and Accessories, a US firm that supplies purses to retailers, for US$162 million. It expects both firms to contribute US$500 million of revenue next year.