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Is Li & Fung Selling Its LF Asia Business?

When it’s deliver-or-die, supply chains become the lifeblood of a company. To that end, the fashion industry has embraced technology to navigate today’s hyper-complicated supply chain, with myriad solutions shaping the first, middle and last mile. Call it Sourcing 2.0.

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Rumors have been circulating of late that leading sourcing firm Li & Fung might sell its LF Asia business, which distributes consumer and healthcare products in China and Southeast Asia.

The move—which could value the business between $300 million and $400 million—would mean Li & Fung could focus on its core sourcing and logistics services, unnamed sources told Bloomberg.

Li & Fung responded in an announcement Wednesday in what seemed an effort to hush speculations, though still a confirmation that talks are in fact underway.

“The board wishes to advise that the company is evaluating strategic alternatives with respect to its Asia consumer and healthcare distribution businesses,” Li & Fung said in a statement. “The company is in discussions with independent third parties in relation to a possible transaction involving such businesses. However, at this time the company has not entered into any agreements in relation to any transactions involving the company or its subsidiaries which is required to be announced under the Listing Rules. Further announcements will be bad as and when appropriate.”

LF Asia has more than 40 offices and distribution centers and more than 30,000 retail outlets across the Asian market. The company distributes consumer goods brands like Procter & Gamble, Johnson & Johnson and Nivea.

Li Fung posted its full-year results for 2015 last month, reporting a 2.4% dip in total turnover to $18.8 billion and a 15.2% plunge in core operating profit to $512 million. Its core trading business, which provides the sourcing services, didn’t fare as well as its logistics business, with turnover decreasing 2.8% compared to a 6.7% increase for logistics.

Weak macroeconomic conditions like a deflationary environment and currency depreciation were to blame for the unspectacular results, Li & Fung said.

The Hong Kong-based company reiterated, by way of bold text in Wednesday’s statement, “These discussions may or may not lead to the entering into of definitive and binding agreements. Shareholders of the company and potential investors are advised to exercise caution when dealing in the shares of the company.”

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