Shares of Hang Ten Group Holdings Ltd (漢登集團控股), the Hong Kong-based clothing retailer with stores across East Asia, climbed by a record amount after it received a HK$2.65 billion (US$340.4 million) buyout offer.
Hang Ten soared 56 percent, the biggest gain since its listing in 2003, to HK$2.65 at the close of trading in Hong Kong. The benchmark Hang Seng Index rose 0.06 percent.
The offer by Li & Fung Retailing Ltd (利豐零售), which has opened more than 100 Toys “R” Us stores in Asia, values the shares at 59 percent more than their closing price on Thursday, before a trading halt. The deal would be the largest for a Hong Kong apparel company, based on data compiled by Bloomberg.
Asian clothing and consumer brands have become acquisition targets as the region’s shoppers grow more affluent. Apparel companies were acquired in 34 deals valued at US$1.3 billion in Hong Kong in the last three years, according to data compiled by Bloomberg. The buyers paid an average premium of 22 percent.
“Hang Ten has retail networks in Greater China and Southeast Asia which can help boost Li & Fung’s presence in the region,” said Kenneth Li (李勇), an analyst at Cinda Securities.
Li & Fung Retailing, whose parent is the biggest investor in consumer-goods supplier Li & Fung Ltd (利豐), offered to buy all outstanding Hang Ten shares at HK$2.70 each, Hang Ten said in a filing to the Hong Kong Stock Exchange on Monday. The stock traded at HK$1.70 on Thursday, the day before trading was halted, pending an announcement.
Li & Fung Retailing said it won’t increase the offer for Hang Ten, which posted a profit of HK$239 million for the year ended March 31.
The acquisition “stands a good chance to get approved, given the high premium to the current share price, and major shareholders have shown their intention to accept the offer,” said Daniel Wong, an analyst at Oriental Patron Holdings.
YGM Trading Ltd (YGM貿易), a clothing retailer in Hong Kong that holds about 22 percent of Hang Ten according to data compiled by Bloomberg, climbed 6.8 percent to close at HK$18.76. Its net proceeds from the sale are estimated to be about HK$589 million, YGM said in a stock exchange filing. Wong said YGM might propose a special dividend in the second half of the next financial year.
YGM has pledged to accept the offer for the 214.2 million Hang Ten shares it owns and a further 8.2 million it has on deposit with a law firm, it said in a Hong Kong Stock Exchange statement yesterday.
The family of Dennis Kung (孔金康) promised to accept the offer for its 464.2 million shares, YGM said. YGM and Kung’s family together control a 69.9 percent stake in Hang Ten, according to the filing.
Hang Ten had HK$429 million in cash and short-term investments as of Sept. 30.
Li & Fung Retailing, part of the closely held Li & Fung Group (利豐集團), made the offer “to enter the growing segment of casual fashion apparel with mass appeal,” and to increase its presence in Asian markets including Taiwan, South Korea, China and Southeast Asia, it said in a statement.
Citigroup acted as the financial adviser for Li & Fung in the transaction.
Li & Fung Retailing has opened more than 100 Toys “R” Us stores across nine markets in Asia as a licensee of Toys “R” Us Inc, the world’s largest toy chain. The two companies on Nov. 1 said Toys “R” Us acquired a 70 percent stake in the operations and might buy the remaining share.
Li & Fung Group is the biggest shareholder in luxury menswear merchant Trinity Ltd and Convenience Retail Asia Ltd, the operator of Circle K stores in Hong Kong.
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