Li Ning Co. (2331) dropped the most in almost two months in Hong Kong trading after its founder sold a 25 percent direct stake in the sportswear retailer to Viva China Holdings Ltd. (8032), a company he partially controls.
Shares of the company founded by the Olympic gymnast of the same name fell 4.8 percent to HK$4.60, the largest drop since Aug. 27, after resuming trading today following a halt since Oct. 15. Viva China shares almost doubled to 12 Hong Kong cents.
Companies fully owned by Li Ning and his brother are selling 266.4 million shares in the retailer to Viva China, a holding firm that is 56 percent controlled by the family, the retailer said in a statement to the Hong Kong Stock Exchange today. Viva China is involved in sports talent management and has property investments, according to its annual report.
Viva China could sell some of its Li Ning shares if it needs to raise funds, said Forrest Chan, a Hong Kong-based analyst at CCB International. (CIRMBFI)
“What worries investors is Viva China’s track record in property investments,” said Chan. “Viva China may require further capital investments or fundraising. The deal puts Li Ning investors at a disadvantage should Viva China need to raise funds in the future.”
Viva China in May 2011 bid 1 billion yuan ($159.8 million) for a parcel of land for a residential and commercial complex in the northeastern Chinese city of Shenyang, it said in an August interim report to the Hong Kong Stock Exchange. The holding company has paid HK$230 million ($29.7 million) as a deposit and has other capital commitments of HK$1 billion for the property, it said in August.
Viva China will pay HK$1.36 billion ($175 million) to buy the 25 percent stake in Li Ning from Victory Mind Assets Ltd. and Dragon City Management Ltd., both owned by the gymnast’s family, it said in a statement to the exchange.
Li Ning reported a 65 percent profit drop last year as competition escalated from Nike Inc. (NKE:US), Adidas AG (ADS), and Anta Sports Products Ltd. (2020) The Beijing-based company has said it will seek to improve results through marketing investments, and by clearing its inventory.
Gymnast Li Ning was the final torchbearer at the opening ceremony of the 2008 Beijing Olympic Games. He won three gold, two silver and one bronze medals in the 23rd Los Angeles Olympic Games in 1984, and founded the company after retiring from athletics, according to the retailer’s annual report.
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