Li & Fung to spin off US-focused brands and licensing divisions through stock split

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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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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