US apparel group Oxford Industries is to sell off its Womenswear Group to a division of Hong Kong-based Li & Fung Group in a deal announced yesterday (1 May).

The all-cash transaction includes the sale of substantially all of Oxford's women's business except for accounts receivable and in-transit inventories.

The group said it expects to close the deal by the end of its fiscal fourth quarter on 2 June. It said it had been approached for a sale by Li &Fung and the companies had then begun a year-long dialogue.

Oxford's tie-ups with retailers Wal-Mart and Target will be substantially reduced as a result of the deal.

The company expects total cash consideration at closing of about $37m and total after-tax cash proceeds of approximately 67m.

The net cash proceeds plus the elimination of trade letters of credit will increase its available borrowing capacity by about $110m.

"Our Womenswear Group has made a significant contribution to our success over the years and the decision to pursue its sale has been very difficult. However, we believe this divestiture is an important step in the ongoing strategic repositioning of our company," said J Hicks Lanier, chairman and CEO of Oxford.

"This transaction will result in a significant improvement in our balance sheet and enable us to continue to invest in the growth of our key consumer lifestyle brands as well as to pursue the acquisition of similar businesses."

Lanier said during a conference call today that the step was part of a "strategic repositioning" that also included the acquisitions of Tommy Bahama and Ben Sherman.

He said the business had been "continually successful" but that Oxford believed the flexibility the transaction would add to its capital structure would be worthwhile.

"We intend to redeploy the capital in acquisition markets", he said, adding there was "nothing imminent" in terms of further buys but that the company was constantly looking at opportunities.

Lanier said Li & Fung was "possibly the world's best supply chain management company" and that the sale was a win-win deal for both sides.

Acquisitive Li & Fung, which took over clothing business Briefly Stated earlier this year, is on a mission to boost its sales to US$10bn by the close of 2008.

Managing director William Fung said in March the company - one of Hong Kong's oldest trading companies - has set aside $100m for acquisitions.