Li & Fung Divests Categories to Simplify Business Model

The sourcing and distribution company further simplifies business to focus on its present strategic direction.

ASIA–Li & Fung, a supply chain solutions partner for brands and retailers, has entered into an agreement to sell three of its product verticals–furniture, sweaters and beauty–to Hony Capital and the Fung Group for an estimated cash consideration of $1.1 billion.

The transaction marks the next step in Li & Fung’s strategy of simplifying its overall business. According to the company, it also allows its senior management team to focus its resources on its three-year goal of creating the “supply chain of the future” as it transforms into a digital company.

Li & Fung created its product verticals in 2015 to consolidate several of its trading businesses across furniture, sweaters and beauty. According to the company, further growth in these categories necessitates expansion upstream and downstream, requiring capital investment and management attention that would best be achieved outside of the company and its present strategic direction.

The divestment also comes following the spin-off of Li & Fung’s licensing business, Global Brands Group, in 2014 and the divestment of the Asia Consumer & Healthcare distribution business in 2016.

“The strategic divestment of the product verticals allows Li & Fung to focus on its core competencies and further strengthens our capital structure,” says Spencer Fung, group chief executive officer, Li & Fung. “The $1.1 billion proceeds will allow us to pay a generous dividend to our shareholders and the remaining $580 million of cash will give us more financial flexibility as we continue to execute our three-year plan goal of building an end-to-end digital supply chain. Our 1H results were solid and our customers and vendor partners are responding very positively to our new digital solutions. We are very excited to be creating a future supply chain that does not yet exist in the market.”

The transaction, which is subject to independent shareholders’ approval, is expected to close in the first half of 2018.