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The proposed initial public offering (IPO) of Hong Kong sourcing giant Li & Fung’s logistics unit has been put on hold, following a US$300m investment from Singapore sovereign wealth fund Temasek.
Temasek is taking a 21.7% stake in LF Logistics in a deal which values the company at $1.4bn. Li & Fung will retain 78.3%.
In a filing to the Hong Kong Stock Exchange, it said the investment would “fund future capital expenditures, repay existing bank facilities and accelerate business growth initiatives”.
Spencer Fung, group chief executive, said: “The investment from Temasek will allow us to unlock the value of LF Logistics and accelerate its business growth. It will also enhance Li & Fung’s capital structure and financial flexibility.
“Our strong operating cash flow and solid balance sheet provides us with ample liquidity to fund future growth and complete our transformation efforts, as we execute our three-year plan goal of creating the supply chain of the future.”
Li & Fung’s traditional business model – providing end-to-end sourcing solutions, primarily for apparel US and European retailers – has been under pressure for a number of years as the retail business has undergone profound change, and increasingly it had looked to logistics rather than its trading business as the future source of growth.
It said today its logistics operations had seen multiple-year double-digit organic growth, due to “robust growth in China, the e-logistics boom, accelerated development in ASEAN across all of its services and its rapid expansion into new geographies, including Japan, Korea and India”.
Joseph Phi, group president of Li & Fung, added: “We expect the strong growth of LF Logistics to continue. With operations in all Asia’s fastest growing cities, we are well positioned to capitalise on rising middle-class consumption, and our early investment in e-logistics allows us to enjoy first-mover advantage.
“Our logistics strength, combined with Li & Fung’s sourcing and new digital supply chain solutions, represents a unique end-to-end offering that encompasses the entire value chain.”