Li & Fung to spin off US-focused brands and licensing divisions through stock split
March 29, 2014 Leave a comment
March 20, 2014 12:13 pm
Li & Fung to spin off divisions through stock split
By Paul J Davies in Hong Kong
Li & Fung, which supplies toothbrushes and T-shirts to some of the world’s biggest retailers, will spin off its US-focused brands and licensing business through a stock split as it launches another round of restructuring.
The company, whose profits tumbled in 2012 and the first half of 2013, will send Bruce Rockowitz, chief executive, to run the separated Global Brand Group and promote Spencer Fung, a scion of the controlling family, to run the Li & Fung Group.
After a string of acquisitions and last year’s restructuring, the spin-off will add another set of difficulties for investors and analysts trying to keep track of how the businesses are performing.
Mr Rockowitz said the brand business, which is US-focused and makes cheaper licensed items – such as Hello Kitty pens and Mickey Mouse pyjamas – was higher margin but more volatile, and had had its problems over the past few years.
However, he said he was excited at the opportunity. “I’ve always been focused on brands,” he said. “It’s a passion.”
The spin-off will be done by giving current investors separate stock in the new company depending on how much they own. It will raise no new capital and the stock split will be on a one-to-one basis.
“If I put my sceptical hat on, effectively they are ejecting all the crap into this brands business and keeping the core,” said one analyst. “But if I want to find a better way to look at it, the brands business will at least be higher growth.”
Mr Rockowitz, a former tennis coach, has worked at Li & Fung since 2000 and been chief executive since 2010. The group has ridden the wave of China’s expansion as the world’s low-cost factory, but has started to hit problems at the same time as China has been losing its competitive edge.
Profits before accounting gains dropped almost 60 per cent in 2012, and stayed under pressure as the group launched a restructuring of its US distribution business in the first half of last year.
Profits in 2013 – excluding accounting gains on lower future payments to be made to the former owners of acquired businesses – were up 85 per cent year-on-year, the company said on Thursday. Including gains of $326m in 2012 and $187m last year, total profits after tax attributable to shareholders rose 17 per cent to $725m.
The company’s shares are down by about half over the past two years. The profits and spin-off were announced after markets closed on Thursday, but Li & Fung shares were up 1 per cent at HK$10.30.
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