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Li & Fung Confirms Move to Divest Asia Distribution Business

Global sourcing company Li & Fung said Tuesday that it has in fact signed an agreement to sell its Asia consumer and healthcare distribution businesses, its LF Asia Distribution division.

Rumors of the move surfaced last month when unnamed sources told Bloomberg the company was mulling the sale. The article was on the mark, estimating the value of the business between $300 and $400 million.

Dah Chong Hong Holdings Limited (DCH), a Hong Kong-based food and consumer products distributor, will buy the business for an estimated $350 million and the deal is expected to close by the end of June.

Li & Fung acquired the consumer and healthcare businesses in 2010 through the privatization of Integrated Distribution Services Group Limited, and the move to divest is part of the company’s three-year plan (2014-16) to simplify its overall business and focus on its core competencies of trading and logistics to drive growth.

“We are very pleased to have reached this agreement with DCH,” Li & Fung group chairman William Fung said. “LF Asia Distribution has more than 40 years’ history and ranks amongst the leading consumer and healthcare distributors in Greater China and Southeast Asia. LF Asia Distribution complements the strengths of DCH and I believe this agreement will benefit both DCH and Li & Fung.”

In the consumer products sector, DCH focuses on wholesaling, distributing, retailing and servicing electronic products, with one-stop logistics support.

As part of the agreement, DCH will acquire the fully operational LF Asia Distribution businesses, which will still operate as a separate entity for the first year and its employees will become DCH staff upon closure. The deal does not cover Li & Fung’s logistics and beauty businesses.

“We are very pleased to welcome LF Asia Distribution’s world-class people and experienced management team to DCH,” DCH chairman Zhang Jijing said. “Its business is highly complementary to our own and we look forward to working together as we grow our combined businesses.”