Footwear manufacturer Pou Chen Corp (寶成工業) has announced a proposal to privatize Pou Sheng International Ltd (寶勝國際), its Hong Kong-listed subsidiary responsible for sportswear retail in China.
Pou Chen’s board has approved a plan to spend HK$10.9 billion (US$1.39 billion) to fully acquire Pou Sheng through its subsidiary, Wealthplus Holdings Ltd, company officials told a news conference on Sunday.
If the proposal is completed, Pou Sheng would become a fully owned unit of the Taiwanese shoemaker and be delisted from the Hong Kong Stock Exchange, Pou Chen said.
Pou Chen plans to buy the unit at HK$2.03 per common share, a 31.8 percent premium over Pou Sheng’s closing price of HK$1.54 on Friday.
The privatization project would include buying HK$6.8 billion of shares from Pou Chen’s retailing arm, Yue Yuen Industrial Holdings Ltd (裕元工業), which owns a 62.41 percent stake in Pou Sheng.
Pou Chen did not give a timetable for the acquisition, but said the plan still requires approval by the Investment Commission and the Yue Yuen and Pou Sheng boards.
Pou Sheng shares yesterday surged 29.22 percent to close at HK$1.99 on the Hong Kong exchange after the announcement, while the stock price of Yue Yuen soared 18.85 percent to HK$38.15.
Pou Chen shares edged up 0.78 percent to NT$38.95 in Taipei trading.
The deal comes as Pou Chen aims to reposition its retailing business by simplifying its management structure, the company said.
Footwear manufacturing and retail remain the Taichung-based shoemaker’s two main revenue contributors, comprising about 70 percent and 30 percent respectively.
Pou Chen’s retail business, which has enjoyed better profitability, in 2016 posted an average gross margin of 35.5 percent, compared with the manufacturing sector’s 25.2 percent, company data showed.
Pou Chen could fully recognize the profits generated by Pou Sheng — which operates more than 8,000 stores in China — after the privatization project is completed, it said.
Pou Chen, the world’s largest branded athletic and casual footwear maker, last year saw its whole-year sales grow 1.26 percent annually to NT$278.6 billion (US$9.47 billion) from NT$275.12 billion, Taiwan Stock Exchange data showed.
It reported a 2.1 percent annual increase in net income to NT$9.08 billion over the first three quarters, with earnings per share of NT$3.08. Average gross margin was 25.85 percent over the nine-month period, up from 25.26 percent a year earlier.
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