Kanematsu Corp has reached an agreement to sell a 55% stake in wholly-owned subsidiary Kanematsu Textile Corporation to the investment arm of Hong Kong-based trading group Li & Fung.

Kanematsu hopes the investment can strengthen KTC's product development and international sourcing capabilities, it said.

Kanematsu Corp, founded in 1889, said that KTC was one of Japan's leading textile and apparel companies - with a consolidated annual turnover in 2006 of over US$450m.

"During the past year we have been discussing a strategic partnership that will bring significant advantages to our customers," said Mr Tadashi Kurachi, chairman of the Kanematsu Corporation.

"With changes in the Japanese apparel market, we want to strengthen KTC's ability to better support the increasingly complex and time-sensitive needs of our customers by improving product development and international sourcing capabilities."

KTC will retain its name and its management will continue to be led by Hiroshi Ishikawa as president and member of the board of directors. Dr Victor Fung will become chairman of the board of directors of KTC.

Li & Fung is also the controlling shareholder of Hong Kong listed Li & Fung Ltd, Integrated Distribution Services Group and Convenience Retail Asia. The combined turnover and profit of its three publicly listed companies totalled US$8,207m and US$253m respectively in 2005.

"Our goal is to maximise the business opportunities between KTC and all our group companies, and in particular, exports to the Japanese market conducted through Li & Fung Limited," said Fung. "We will work closely with the management of KTC to forge a strong partnership over time to meet the changing needs of our customers in Japan."

The new ownership structure is expected to commence in April 2007.