Clothing producer Roo Hsing Co Ltd (如興) plans to raise NT$7 billion (US$211.4 million) by issuing new common shares on the local bourse and is to use the proceeds for a planned acquisition of a Hong Kong apparel solution provider.
The company yesterday shared its plans in a filing with the stock exchange, following it receiving the green light by the Investment commission to invest US$387.59 million in Hong Kong-based J.D. United Manufacturing Corp Ltd (玖地製造).
Roo Hsing in September announced a plan to outright acquire the Hong Kong-based company for more than US$380 million. Roo Hsing at the time said the deal would help it expand production capacity and global market share.
The commission on Thursday said Roo Hsing’s planned investment would include an investment of US$233.76 million in J.D. United’s base in Hong Kong and US$153.83 million in J.D United’s five subsidiaries in China.
Roo Hsing has a paid-in capital of NT$1.36 billion. The company plans to raise a total of between NT$12 billion and NT$15 billion to fund the acquisition.
The commission said that although it has approved Roo Hsing’s planned investment, the company would need to report and seek the commission’s approval again when seeking funds from banks or private equity funds.
“We closely watch Roo Hsing’s funding sources. If the funds involve Chinese capital, the firm will need to get the commission’s approval again,” commission Executive Secretary Emile Chang (張銘斌) said by telephone.
As part of the conditions for the approval of Roo Hsing’s planned investment, Chang said the commission has requested that J.D. United’s Chinese shareholders not participate in Roo Hsing’s recapitalization scheme.
Roo Hsing also needs to gain approval from the Financial Supervisory Commission to transfer the proceeds of the stock sale to the Hong Kong company and its Chinese subsidiaries, Chang said.
Roo Hsing produces 16 million to 18 million pairs of jeans per year, while J.D. United makes more than 50 million jeans annually for major companies including Levi Strauss & Co, Gap Inc and Uniqlo.
After the acquisition, Roo Hsing would become the world’s largest jeans manufacturer, with a production capacity of 70 million pairs of jeans per year, the company said in a statement.
Roo Hsing reported net losses of NT$141.95 million, or losses per share of NT$0.97, in the first three quarters of this year. In comparison, the company posted net income of NT$36.16 million, or earnings per share of NT$0.37, over the same period last year.
In the first 11 months of this year, the firm’s combined revenue totaled NT$2.19 billion, down by 6.48 percent from last year’s NT$2.34 billion.
Roo Hsing shares remained unchanged at NT$20.75, while the TAIEX lost 0.75 percent.
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