Sourcing giant Li & Fung is selling a 21.7% stake in its logistics business for US$300m to Singapore-headquartered investment company Temasek, as plans for a proposed spin-off IPO of the segment are postponed until further notice.
Li & Fung says the investment values LF Logistics at about $1.4bn on a post-money equity valuation basis. Upon completion, Li & Fung will remain a controlling shareholder of LF Logistics with a 78.3% stake.
Proceeds from the investment will be used to fund future capital expenditures, repay existing bank facilities and accelerate business growth initiatives at LF Logistics. As a result of this investment, Li & Fung says the proposed spin-off IPO will be postponed until further notice.
LF Logistics has achieved multiple-year double-digit organic growth and it maintains strong momentum from robust growth in China, the e-logistics boom, accelerated development in ASEAN across all of its services, and its rapid expansion into new geographies including Japan, Korea and India.
“We expect the strong growth of LF Logistics to continue. With operations in all of Asia’s fastest growing cities, we are well positioned to capitalise on rising middle-class consumption and our early investment in e-logistics allows us to enjoy first-mover advantage,” says Joseph Phi, group president of Li & Fung. “Our logistics strength combined with Li & Fung’s sourcing and new digital supply chain solutions, represents a unique end-to-end offering that encompasses the entire value chain.”
Spencer Fung, group CEO of Li & Fung, adds: “The investment from Temasek will allow us to unlock the value of LF Logistics and accelerate its business growth. It will also enhance Li & Fung’s capital structure and financial flexibility. Our strong operating cash flow and solid balance sheet provides us with ample liquidity to fund future growth and complete our transformation efforts, as we execute our Three-Year Plan goal of creating the Supply Chain of the Future.”
Last week, the new parent company of US department store retailers Sears and Kmart agreed new strategic supply chain partnerships with Li & Fung and Triburg in a bid to reduce lead times and improve efficiencies in bringing product to market.