January 22, 2018 / 4:49 AM / 6 months ago

China's Pou Sheng gets $1.4 billion offer to go private, shares soar

HONG KONG (Reuters) - Pou Sheng International (Holdings) Ltd (3813.HK) said it had got a proposal from its Taiwanese parent Pou Chen Corp (9904.TW) to be taken private in a deal valuing the firm at $1.4 billion, sending shares in the Chinese sportswear retailer up 31 percent.

Pou Sheng shareholder Yue Yuen Industrial (Holdings) Ltd (0551.HK) has agreed to sell its 62.41 percent stake for HK$6.8 billion, or at a cancellation price of HK$2.03 per share, the Hong Kong-listed firm said in a stock exchange filing on Sunday. Pou Chen owns almost half of Yue Yuen.

The offer, which values Pou Sheng at HK$11 billion and reflects a premium to the stock’s HK$1.54 Friday close, comes as traditional brick-and-mortar retailers continue to face mounting competition with online rivals luring buyers away.

Pou Sheng would need “significant investments” to transform its business and would have flexibility and more advantageous financing if it were to be taken private, according to the filing from the Hong Kong-listed firm.

The sporting goods industry “is experiencing unprecedented changes and challenges” from the rise of online shopping which has changed customers’ expectations, the filing added.

The boards of Pou Chen and Pou Sheng believe Pou Sheng’s listing status is ineffective in providing sufficient funds for the company’s business and growth, the filing says.

For Yue Yuen, the disposal will mean it will be able to focus on its core manufacturing business while improving financial clarity and transparency, UBS said in a research note, lifting its share price target for Yue Yuen to HK$38 from HK$35.

It kept its “buy” rating for the stock.

Yue Yuen said it would distribute a one-off special dividend to its shareholders on completion of the deal, sending its stocks up 15.6 percent to a record high of HK$37.10.

Pou Sheng shares jumped to HK$2.02 apiece, the highest since Feb. 22, while Pou Chen shares gained 0.8 percent to T$38.95.

The Taiwanese footwear manufacturer will not increase the offer price for Pou Sheng, according to the filing.

Citigroup is acting as financial adviser to Pou Chen.

Just last year, in a deal similar to Pou Sheng’s, a consortium led by private equity firms Hillhouse Capital Group and CDH Investments offered to buy out Hong Kong-listed Belle International Holdings Ltd in a $6.8 billion deal, as retailers sought new growth from e-commerce channels.

Reporting by Kane Wu and Donny Kwok; Editing by Himani Sarkar

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