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Li & Fung Looks to Spin Off Global Brands Group in Next 3 Months

Global sourcing leader Li & Fung has submitted a formal application to list its consumer brands and licensing business, called Global Brands Group, on the Hong Kong Stock Exchange within the next three months.

Shares of Li & Fung rose more than 20 percent to HK $12.48 the day after the announcement, but have since dipped to HK $10.56 at close of business yesterday.

Li & Fung originally announced its plans to spin off its Global Brands Group in March as part of an ambitious three-year plan for expansion. The company has said separating the branding and licensing business, which includes Coach. Inc. shoes and Michael Kors belts, will allow for increased focus on its core trading business.

Company chairman William K. Fung said he did not expect this year to be good with overseas clients. “The previous winter season, the weather was extreme. In the US, there was a slight growth. It wasn’t very big but it wasn’t a decline. For Europe, we heard from our clients that their business is better, so Europe should improve,” he said, according to the South China Morning Post.

In March, Li & Fung released its 2013 annual report showing a 70 percent core operating profit increase to $871 million, and a 21 percent net profit increase to $755 million. The spin off is expected to be a cash generator for the company.

Standard & Poor’s credit analyst Lillian Chiou, said, “We think the spin-off of [Global Brands] is somewhat credit positive but is more volatile in our view and requires higher working capital management. It carries much higher fashion risk and inventory risk,” the South China Morning Post reported.