Leading footwear manufacturer Yue Yuen Industrial Holdings intends to sell its stake in retailer Pou Sheng International (Holdings), as part of a plan to take the store chain private.
Yue Yuen, which according to its website is the largest manufacturer of athletic and casual footwear for major international brands, plans to sell its 62.41% stake in the footwear chain to its parent company, Pou Chen corporation. Pou Chen in turn is offering Pou Sheng shareholders 26 cents per share, or a 31.82% premium over the retailer’s share closing price on Friday.
Pou Chen plans to finance the deal with cash and loans, which financial advisor Citibank said it’s well positioned to do. The company expects to complete the privatization by May 30, at which point Pou Sheng shares will be cancelled.
In a statement, Pou Cheng said the move to make Pou Sheng a private, wholly owned subsidiary, would allow the retailer to better position itself to compete in a market that’s experiencing e-commerce growth.
“Pou Sheng needs to be very flexible in transforming its operations in a timely fashion; Pou Sheng will enjoy more advantageous financing and coordinated internal treasury management under Pou Chen; and Pou Sheng will benefit from a streamlined corporate and management structure and an enhanced sharing of expertise,” the announcement said.
Pou Sheng began trading on the Hong Kong stock exchange in 2008 after being spun off from Yue Yuen. According to a stock exchange filing, both the Pou Chen Board and Pou Sheng Board deem “the current valuation level and low liquidity in the trading of Pou Sheng Shares indicate that Pou Sheng’s listing status is ineffective in providing a sufficient source of funding for Pou Sheng’s business and growth.”
Yue Yuen, which supplies Nike, Adidas, Rebook and other leading brands from factories in China, Vietnam, Indonesia and the U.S., is expected to receive $80 million from the deal. Part of the proceeds will be used to offer a one-time special dividend to shareholders and the company intends to use the balance for working capital.
Yue Yuen reported $6.7 billion in revenue for the nine months ending Sept. 30, which represented 6.7% growth over the prior year period. Athletic shoes accounted for 46.2% of revenue, while outdoor/causal shoes made up 13.2%. Retail sales contributed 32.8%.