* Founder's stake could rise to 10.33 pct
* Chairman says will consider founder for board
* Surprise move expected to provide short-term boost
* Esprit's shares hit highest level in six months
(Adds chairman comments)
By Donny Kwok and Alison Leung
HONG KONG, Nov 15 One of the founders of Esprit
Holdings Ltd, Hong Kong billionaire Michael Ying, has
doubled his stake in the ailing retailer to become its
second-biggest shareholder, a surprise move that fuelled hopes
he could help turn the company around.
Since stepping down as chairman six years ago, Ying has
steadily been selling his shares as the fashion retailer's
fortunes have soured. His decision to buy back into the company
pushed shares 33 percent higher on Thursday, in their sharpest
rise in three months.
The company's current chief later held out the possibility
of a place on the board of directors, if Ying was interested.
Under Ying's leadership, the Europe-focused company rose to
become the world's fifth-largest fashion retailer and had a
market value of about $12 billion. It now has a market value of
$2.7 billion and ranks 21st among global apparel retailers.
Esprit, which was borne out of a clothing sale from the back
of a station wagon in San Francisco more than 40 years ago, is
in the midst of a $2.3 billion restructuring that has been
overshadowed by a management reshuffle and lingering uncertainty
in the euro zone.
"It is short-term positive news to Esprit. Investors were
caught by surprise by his move and that also recalled the
glorious moments of the company when Ying was in charge," said
Steve Chow, analyst at Kingsway Group Research.
Ying has increased his holding in Esprit to 10.33 percent,
which includes a 5.99 percent stake and a rights issue, as of
Nov. 7, according to a Hong Kong stock exchange filing. He
bought 23.2 million shares at an average price of HK$11.669.
Previously, Ying held 4.79 percent of the company.
Once the rights issue is exercised, he will become the
second-largest shareholder after Lone Pine Capital LLC, which
holds 10.88 percent.
Esprit chairman Raymond Or said on a conference call just
before the market closed on Thursday that the company would
consider Ying for the board if he was interested.
"Ying has not indicated his intentions to join the board at
the moment. If Ying shows his intention, Esprit's board of
directors will take it into consideration," Or said, adding the
two are good friends and often play sport and dine together.
Analysts were quick to highlight that while the company
performed strongly under Ying's leadership, the operating
environment has changed considerably since then, particularly in
Europe, where Esprit generates three-quarters of its sales.
"There was no fast-fashion player at that time. In terms of
distribution channels, department stores and multi-brand apparel
chains were the key channels. These channels are structurally
much weaker now," Deutsche Bank said in a research report.
Ying's share purchase comes just weeks after Esprit, which
competes with Swedish clothing retailer Hennes & Mauritz AB
and Spain's Inditex, tapped shareholders for
up to $677 million to help finance its long-planned
multi-billion dollar restructuring.
Shares of Esprit, which have climbed nearly 40 percent this
year, rose to a six-month intraday high of HK$14.08 on Thursday.
They closed up 22 percent at HK$12.96, beating a 1.6 percent
drop in the benchmark index.
Ying has steadily sold his stake in the fashion chain in the
past few years to less than 5 percent before the latest buy.
In April 2004, he held a 30.8 percent stake in the company,
but over the next two years he sold HK$15.4 billion worth of
shares, cutting his stake to 8.7 percent. In February 2010, he
cut his holding to 1.79 percent after selling HK$4.67 billion
worth of shares.
Ranked as the 14th richest person in Hong Kong by Forbes
this year, Ying is married to Taiwanese actress Brigitte Lin.
Esprit, which also competes with and U.S. group GAP Inc
and Japan's Fast Retailing Co Ltd, in August
hired Jose Manuel Martínez Gutiérrez, an executive from Inditex,
as its new chief executive in a bid to reassure investors.
The company had been a favourite of Hong Kong investors but
has been hit hard in recent years by the euro zone debt crisis
and is grappling to revive its brand, which it said last year
had "lost its soul".
Esprit posted a net profit of HK$318 million ($41 million)
for its second half ended in June, compared with a HK$2.06
billion loss a year earlier, based on Reuters' calculations.
That missed an average forecast of HK$455 million according
to a survey of 10 analysts by Reuters.
(Reporting by Donny Kwok and Alison Leung; Editing by Anne
Marie Roantree and Jeremy Laurence)