Li & Fung Agrees to Sell a Business Division for $1.1 Billion

By Saurabh Chaturvedi Features Dow Jones Newswires

Li & Fung Ltd. (0494.HK) Thursday said it agreed to sell a business division to a company partly owned by a major shareholder for $1.1 billion.

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In a stock-exchange filing, Hong Kong-listed Li & Fung said it would partly use the proceeds from the sale to distribute $520 million in special dividends to shareholders. The remainder will be put toward strengthening its capital structure, said the company, a global supply-chain middleman.

The division is being sold to True Sage Ltd., a special purpose vehicle, the company said. At the deal's closing, True Sage will be owned by FH 1937--a substantial shareholder of Li & Fung--as well as two other parties: investment-holding company United Strength Element Ltd., which is wholly owned by Hony Capital, and Fung Investments Ltd., a limited liability company based in the British Virgin Islands.

The division being sold includes its furniture, beauty and sweaters businesses. It was facing margin pressure and declining profitability amid changing market conditions, it said.

However, Li & Fung said it expects to recognize a loss of about $610 million because of the discontinued operations from the business being shed. As a result, the company is likely to post a net loss in 2017, it said.

With the divestment, Li & Fung said it would be able to focus on its core supply-chain business.

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Write to Saurabh Chaturvedi at saurabh.chaturvedi@wsj.com

(END) Dow Jones Newswires

December 14, 2017 06:01 ET (11:01 GMT)