Global sourcing specialist Li & Fung is to divest three of its vertical product businesses in a US$1.1bn deal that will allow the business to focus on its core competencies.
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The move will see private equity firm Hony Capital team up with the Fung Group (which is controlled by Li & Fung’s founding Fung family) acquire the sweaters, beauty and furniture product verticals. These which were created in 2015 to consolidate some of the trading businesses of Li & Fung in specific product areas.
According to Li & Fung, further growth in these product categories requires capital investment in upstream and downstream expansion, which it says “is best achieved outside of Li & Fung and its present strategic direction.”
This transaction continues the sourcing giant’s strategy of simplifying its overall business and will allow its senior management team to focus resources on the current three-year plan – whose goal is to create “the supply chain of the future” and transform Li & Fung into a digital company.
How Li & Fung is getting smarter, faster, more efficient
The latest move follows the spin-off of Global Brands in 2014 and the sale of the Asia Consumer & Healthcare distribution business in 2016.
“The strategic divestment of the product verticals allows Li & Fung to focus on its core competencies and further strengthens our capital structure,” says Spencer Fung, group CEO of Li & Fung.
The proceeds from the sale will see a dividend of $520m to return cash to shareholders, while the remaining $580m will “give us more financial flexibility as we continue to execute our three-year plan goal of building an end-to-end digital supply chain.”
The transaction is expected to close in the first half of 2018.
Paul Fowler, chief information officer at Li & Fung, recently explained how the firm is working to build a fully integrated digital platform that connects every stakeholder and process in its global supply chain network so that real-time data can be captured and shared to enable smarter, faster and more effective decisions.
Why speed is a new currency for Li & Fung
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2022: So far In Venture Capital
- Track the Aggregate Investment Volumes in PE/VC-Stage firms across geographies and sectors, in addition to viewing the specific deals that drove these volumes
- Identify the top investors already active in any sector-Geography combinations
- Assess the Performance of Financial and Legal Advisors, supporting the Dealmaking in any segment of choice (Customizable League tables)
- Understand what is driving the PE/VC fundraising (Deal Rationale)
