Yue Yuen Industrial Holdings, the world’s largest footwear maker which supplies global brands including Nike and Adidas, is set to receive HK$6.76 billion (US$860 million) from the proposed privatisation plan of its retail arm, according to a stock exchange filing on Sunday.
Yue Yuen plans to sell its 62.41 per cent stake in Chinese footwear retailer Pou Sheng International (Holdings) to its Taiwan-listed parent Pou Chen Corporation in a HK$10.9 billion privatisation plan. Pou Chen in turn owns a 49.99 per cent stake in Yue Yuen.
Pou Chen is offering Pou Sheng shareholders HK$2.03 per share, which represents a 31.82 per cent premium over the HK$1.54 per share closing price on Friday.
The privatisation offer, which needs shareholders’ approval, is expected to be completed by May 30 after which Pou Sheng will cancel its listing status in Hong Kong.
Pou Chen said it intends to finance the offer from internal cash resources and loans. Its financial adviser Citigroup is satisfied the company has sufficient financial resources for the offer.
Yue Yuen said it plans to return part of the HK$6.76 billion as a one-off special dividend to its shareholders while the rest will be used for general working capital.
Pou Sheng was spun off from Yue Yuen and listed in Hong Kong in 2008. Since trading in the shares was not active it made the “listing status ineffective in providing a sufficient source of funding for Pou Sheng’s business and growth”, the filing said.
Pou Chen said turning Pou Sheng into a wholly owned subsidiary would allow the retailer to be more flexible in developing a new business model to better compete in China’s retail market where it faces increasing competition from online stores and aggressive marketing from sportswear companies.
“Pou Sheng needs to be very flexible in transforming its operations in a timely fashion; Pou Sheng will enjoy more advantageous financing and coordinated internal treasury management under Pou Chen;
and Pou Sheng will benefit from a streamlined corporate and management structure and an enhanced sharing of expertise,” the announcement said.
Yue Yuen, which has been listed in Hong Kong since 1992, owns factories in China, Vietnam and Indonesia, producing 300 million pairs of shoes a year for Nike, Adidas, Reebok, New Balance, Puma and Timberland.