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| The Directors of Li & Fung Limited wish to announce that it has today entered into a sale and purchase agreement with Swire Pacific Limited, a listed company in Hong Kong, to acquire from it 100% interest in each of Swire & Maclaine Limited and Camberley Enterprises Limited, both of which are currently wholly-owned subsidiaries of Swire Pacific Limited, for an aggregate cash consideration of HK$450 million. The sales and purchase agreement constitutes a discloseable transaction of Li & Fung Limited under the Listing Rules of the Stock Exchange of Hong Kong Limited. A circular setting out the details of the acquisition will be despatched to shareholders as soon as practicable.
The Directors are of the view that the above acquisitions complement the Company's existing trading business and enable the Company to further broaden its customers' base in the US and Europe. |
Parties to the Agreement
| Buyer: | Li & Fung Limited (the "Company") |
| Seller: | Swire Pacific Limited ("Swire Pacific") |
| Swire Pacific is not connected with the Company or any of its substantial shareholders, chief executive or directors, or any of its subsidiaries or their respective associates as defined in the Stock Exchange listing rules. | |
| Date of the Agreement: | 29th December, 1999 |
| Consideration: | HK$450 million, subject to adjustments for a maximum amount of HK$50 million |
Terms of the Sale and Purchase Agreement
Under the Sales and Purchase Agreement (the "Agreement"), the Company shall pay a cash consideration ("Consideration") of HK$450 million. The Consideration is arrived at based on arms length negotiation between the parties and represents a price earnings multiple of approximately 9.4 times the combined pro forma after-tax earnings of HK$47.7 million of both Swire & Maclaine Limited ("Swire & Maclaine") and Camberley Enterprises Limited ("Camberley") for the year ended 31st December, 1998. The Company has paid HK$150 million in cash, being one-third of the Consideration, upon signing of the Agreement. The remaining consideration will be paid upon completion of the Agreement, currently expected to be on or before the end of April 2000 following the finalisation of the audited accounts of both companies. There is no condition attached to the Agreement.
Swire Pacific has warranted in the Agreement that the audited combined net asset value of Swire & Maclaine and Camberley shall be not less than HK$71 million and that their combined working capital (being current assets less current liabilities) shall be not less than HK$17.5 million as at 31st December, 1999. The above warranted net asset value figure by Swire Pacific does not represent the current combined net asset values of both companies.
Information on Swire & Maclaine Limited
Established in 1946, Swire & Maclaine primarily provides product sourcing and quality assurance services to customers. Product assurance services offered by Swire & Maclaine enable overseas retailers and international brands to ensure the quality and timely delivery of products from their suppliers and manufacturers and that such suppliers also conform to international codes of labour practices. Swire & Maclaine currently has 12 offices in Asia, a service centre in the US and 11 quality control hubs covering some 31 production markets. At present, approximately 80% of Swire & Maclaine's sales are derived from customers in the US with the remaining 20% from the United Kingdom, other European countries, Canada and Japan. In terms of the type of products serviced, approximately 65% of its turnover is currently derived from apparel products and approximately 35% from non-apparel products, including toys, furniture, gifts, cookware and cutlery.
For the year ended 31st December, 1997, Swire & Maclaine's turnover was approximately HK$2,780 million. Its pro forma pre-tax and after-tax profits (after deducting interest income that would not be available to the Company following the Agreement) were approximately HK$17.3 million and HK$15.1 million respectively. For the year ended 31st December, 1998, the corresponding turnover, pre-tax and after-tax profit figures were approximately HK$2,356 million, HK$15.6 million and HK$12.7 million respectively.
Information on Camberley Enterprises Limited
Established in 1979, Camberley is an apparel company that acts as a "virtual manufacturer" of high quality ladies sportwear, ready-to-wear fashion and home accessories for retailers, brands and designer labels in the United Kingdom, US and Japan. Camberley designs, produces patterns and makes samples of apparel in-house while subcontracting the manufacturing process to factories in Shenzhen, China. Camberley operates in Hong Kong and in Shenzhen where it has a quality assurance laboratory. Currently, customers in the United Kingdom and the US account for approximately 70% and 27% of Camberley's sales respectively, with the balance from Japan and other countries.
For the year ended 31st December, 1997, Camberley's turnover was approximately HK$542 million. Its pro forma pre-tax and after-tax profits (after deducting interest income that would not be available to the Company following the Agreement) were approximately HK$31.7 million and HK$26.6 million respectively. For the year ended 31st December, 1998, the corresponding turnover, pre-tax and after-tax profit figures were approximately HK$495 million, HK$40.5 million and HK$35.0 million respectively.
Reasons for, and benefits of, the Agreement
The Consideration will be financed by the Company's internal cash resources.
Li & Fung Limited is a multinational trading company engaged principally in the export trading of consumer products. The Directors are of the view that the above acquisitions complement the Company's existing trading business and enable the Company to further broaden its customers' base both in the US and Europe. It is envisaged that both Swire & Maclaine and Camberley will benefit from the Company's existing business resources and support.
It is envisaged that existing operations of both companies will be maintained and that key management of both companies will be retained. The Company will also appoint its directors onto the boards of both companies in due course but it has not yet determined at this stage the exact number of members to be appointed to both companies.
Further details of the Agreement and information on Swire & Maclaine and Camberley will be contained in a circular to be despatched to shareholders as soon as practicable.
By order of the Board
Victor FUNG Kwok King
Chairman
Hong Kong, 29th December, 1999
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