HK's Li & Fung set to open up 6.6 percent on $1.1 billion divestment

HONG KONG (Reuters) - Shares of Li & Fung Ltd 0494.HK were set to open up 6.6 percent on Friday after the global exporter said it would divest its furniture, beauty and sweaters businesses for $1.1 billion.

The stock was set to open at HK$4.35, the highest open since May 2016. That compared to a 0.6 percent fall for the benchmark index .HSI.

Li & Fung said it would divest the furniture, beauty and sweaters businesses, which are still under margin pressure with declining profitability, to a consortium comprising major shareholder Fung Holdings (1937) Ltd and one of China’s top private equity firms, Hony Capital.

The company said it would pay a special dividend of $520 million to shareholders.

UBS maintains a “buy” rating on the stock, saying the divestment of a shrinking business will allow Li & Fung to improve its capital structure and to focus on growth segments.

Reporting by Donny Kwok; Editing by Stephen Coates