Li & Fung's $400 million acquisition of CK or other clothing agency return rate of 19%

If you want to buy CK clothes in the future, you have to buy it from Hongkong Lifeng. Through an acquisition, Li & Fung has taken the agency of CK and other apparel brands into its pocket.

On October 19th, Hong Kong Li & Fung Corporation announced that it will acquire the vast majority of assets of Wear Me Apparel in the United States at a total price of no more than $401.8 million. This is Li & Fung's biggest acquisition in the past decade. In the previous 15 years, Li & Fung had acquired a total of nearly 40 companies.

Wear Me Apparel mainly manages young men's and children's clothing in the United States and manages a series of combinations of domestic brands, specialty brands, private brands, and cartoon characters. In addition to apparel design, procurement, franchising, marketing, and sales of children's wear, the other important businesses—Calvin Klein, Ecko, Hurley, US Polo Association, Disney and other ten famous brands’ agents’ rights will also be transferred to Lee. Under the management of Feng Ming.

DBS Vickers, a Hong Kong-based brokerage, rated the acquisition as "an ideal deal". In 2008, Wear Me Apparel achieved $700 million in revenue and $12 million in after-tax profits. Currently, it has no negative assets. The agency believes that the acquisition will help Li & Fung Group to implement a brand portfolio that will help broaden product categories and consolidate local business in the United States. Bank of America-Merrill Lynch anticipates that the transaction will expand Li & Fung's U.S. business by about 40%, equivalent to $700 million.

Prior to this, Li & Fung Group, in addition to managing the world's largest consumer goods supply chain, also has the right to act as a representative of several well-known clothing brands, including the Canadian leisure apparel brand Roots and the Swedish leisure brand GANT.

The European and American markets have always been the main battlefield of Li & Fung Group. Feng Guolun, the managing director of Li & Fung Group, stated at the shareholders meeting that this year it will focus on expanding Europe and the United States business and supply chain business, and will focus on the acquisition of local businesses in the European and American communities.

"In 2008, the U.S. local business income was 1.5 billion U.S. dollars. We need to increase revenue in this area," said Feng Guolun. "The goal of Li & Fung is to increase the U.S. local business revenue to 3 billion U.S. dollars by the end of next year."

Li & Fung's operating revenue for its continuing business in 2007 was HK$100 billion, an increase of less than 1% compared with HK$92.45 billion in 2007.

Faced with the reduction of European and American orders caused by the economic crisis, Li & Fung hopes to supplement sales through the continuous acquisition of new outsourcing businesses. In 2008, Li & Fung successively made seven acquisitions, including Imagine, Silvereed, and Scott Wilson.

In order to get closer to the three-year plan target of US$3 billion in U.S. domestic business operations and win the trust of investors, Li & Fung has implemented several M&A expansion plans this year.

On February 24, Li & Fung acquired the Asian sourcing business of the US apparel brand Liz Claiborne Inc at a consideration of US$83 million and became the main purchasing agent for all of its brands' global apparel and accessories (excluding jewelry products). On August 13, Li & Fung reached an agreement with Talbots, an American women's apparel retailer, to become the sole purchasing agent for the Talbots brand.

BOC International expects Li & Fung's return on capital investment will be 19%, which is the highest in the past.

“When the asset price recovers to a reasonable level, it is the best time for the group to pursue the acquisition plan,” said Le Yumin, president of Li & Fung Group. “Li & Fung is studying the acquisition of several US dollars with annual sales of 100 million U.S. dollars. "The enterprise." He said that the company now has $1 billion in acquisition funds and is expected to implement it in the next few months.

Of course, in addition to optimizing the existing brand and private brand portfolio, these acquisitions will also give Li & Fung more power in the global retail trade.