(Updates with closing share price in second paragraph.)
Dec. 20 (Bloomberg) --Hang Ten Group Holdings Ltd., the Hong Kong-based clothing retailer with stores across east Asia, climbed by a record after receiving a HK$2.65 billion ($340 million) buyout offer.
Hang Ten soared 56 percent, the biggest gain since listing in 2003, to HK$2.65 at the close of trading in Hong Kong. The benchmark Hang Seng Index rose 0.06 percent.
The offer by Li & Fung Retailing Ltd., which has opened more than 100 Toys “R” Us stores in Asia, values the shares at 59 percent more than their closing price on Dec. 15, before a trading halt. The deal would be the largest for a Hong Kong apparel company, based on data compiled by Bloomberg.
Asian clothing and consumer brands have become acquisition targets as the region’s shoppers grow more affluent. Apparel companies were acquired in 34 deals valued at $1.3 billion in Hong Kong in the past three years, according to data compiled by Bloomberg. The buyers paid an average premium of 22 percent.
“Hang Ten has retail networks in Greater China and South east Asia which can help boost Li & Fung’s presence in the region,” said Kenneth Li, an analyst at Cinda Securities.
Li & Fung Retailing, whose parent is the biggest investor in consumer-goods supplier Li & Fung Ltd., offered to buy all outstanding Hang Ten shares at HK$2.70 each, Hang Ten said in a filing to Hong Kong’s stock exchange yesterday. The stock traded at HK$1.70 on Dec. 15, the day before it was halted, pending an announcement.
Li & Fung Retailing said it won’t increase the offer for Hang Ten, which posted a profit of HK$239 million for the year ended March 31.
The acquisition “stands a good chance to get approved, given the high premium to the current share price, and major shareholders have shown their intention to accept the offer,” said Daniel Wong, an analyst at Oriental Patron Holdings.
YGM Trading Ltd., a clothing retailer in Hong Kong that holds about 22 percent of Hang Ten according to data compiled by Bloomberg, climbed 6.8 percent to close at HK$18.76. Its net proceeds from the sale are estimated to be about HK$589 million, YGM said in a stock exchange filing. Wong said YGM may propose a special dividend in the second half of financial year 2012.
YGM has pledged to accept the offer for the 214.2 million Hang Ten shares it owns and a further 8.2 million it has on deposit with a law firm, it said in a Hong Kong stock exchange statement yesterday.
Li & Fung Retailing
The family of Dennis Kung promised to accept the offer for its 464.2 million shares, YGM said. YGM and Kung’s family together control a 69.9 percent stake in Hang Ten, according to the filing.
Hang Ten had HK$429 million in cash and short-term investments as of Sept. 30.
Li & Fung Retailing, part of closely held Li & Fung Group, made the offer “to enter the growing segment of casual fashion apparel with mass appeal,” and to increase its presence in Asian markets including Taiwan, South Korea, Mainland China and South East Asia, it said in a statement.
Citigroup acted as the financial adviser for Li & Fung in this transaction.
Li & Fung Retailing has opened more than 100 Toys “R” Us stores across nine markets in Asia as a licensee of Toys “R” Us Inc., the world’s largest toy chain. The two companies on Nov. 1 said Toys “R” Us acquired a 70 percent stake in the operations and may buy the remaining share.
Li & Fung Group is also the biggest shareholder in luxury menswear merchant Trinity Ltd. and Convenience Retail Asia Ltd., the operator of Circle K stores in Hong Kong.
--Editors: Anjali Cordeiro, Dave McCombs
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