China's champion gymnast Li Ning considers taking company private, sources say

Samsonite SA

12/03/2024 06:42

(Updates stock movement in paragraph 6; adds data, other deals
and quotes in paragraphs 19-24)
    By Julie Zhu and Kane Wu
       HONG KONG, March 12 (Reuters) - Chinese billionaire
entrepreneur and Olympic champion Li Ning is considering taking
his namesake sportswear company private from the Hong Kong stock
exchange, four people said, adding to a string of such potential
deals in a faltering market.
    Li is considering leading a consortium to buy out Li Ning Co
Ltd  2331.HK , which had a market capitalisation of HK$52.85
billion ($6.8 billion) as of Monday, said the people, who have
knowledge of the matter.
    Li, 61, founded Li Ning Co a few years after retiring from a
decorated gymnastics career in 1988. Along with his family, he
owns more than 10% of the company, its 2023 interim report
showed.
    A number of global and regional private equity firms,
including TPG, PAG and Hillhouse Investment, have been tapped to
see if they are interested in joining as an investor, two of the
people said. 
    The discussions to take Li Ning Co private are in the early
stages and details have not been finalised, said the sources,
who declined to be identified as the information was
confidential. Li Ning made its Hong Kong debut in 2004.
    The company's shares jumped as much as 20% to HK$24.55
following the Reuters report on Tuesday, the highest since
November.
    Beijing-headquartered Li Ning Co said in a response to
Reuters that it had "not received any information regarding this
matter as of now."
    Li did not immediately respond to a request for comment sent
via the company. 
    TPG, PAG and Hillhouse declined to comment.     
    Stock markets in Hong Kong and mainland China have tanked
over the past year amid China's economic slowdown, a lack of
strong stimulus policies and geopolitical tensions.
    Hong Kong's Hang Seng index  .HSI  slumped 14% in 2023,
while China's benchmark CSI 300 index  .CSI300  fell 11%.
    Li feels his company is undervalued in Hong Kong and would
target a hefty premium over its current share price in a
potential buyout, two of the sources said. 
    He did not have an imminent plan to relist his company on
the mainland, one of them added. 
    Li Ning Co was the worst-performing blue-chip stock on the
Hong Kong bourse in the past year, down nearly 70% as of Monday,
LSEG data showed. That compares with a 25% drop in main rival
Anta Sports  2020.HK . 
    Li was regarded as China's "gymnastics prince" after winning
six of the seven gold medals at the 1982 World Cup Gymnastic
Competition, and carried on to win six medals at the 1984 Los
Angeles Olympic Games.
    Li Ning Co said in December it would buy a Hong Kong
commercial and retail property from Henderson Land  0012.HK  for
HK$2.21 billion as its Hong Kong headquarters, which sent its
shares to a three-and-a-half-year low on the day of the
announcement.
    Li also said at the time he planned to repurchase up to HK$3
billion of shares from the open market in the next six months,
his first such move in its corporate history, according to
Citigroup analysts. 
    In the announcement, the company's board said it believed
its current share price was "below its intrinsic actual value."
    
    HONG KONG TAKE-PRIVATE DEALS
    Hong Kong-listed firms have been involved in $4 billion
worth of take-private deals so far in 2024, versus $1.2 billion
for all of last year, Dealogic data showed. Buyers often cited
undervalued shares as a reason for the deals.
    A number of Hong Kong-listed companies including French
skincare company L'Occitane  0973.HK  and American luggage maker
Samsonite  1910.HK  have also recently engaged with advisers and
investors about potential take-privates, separate sources said. 
    Samsonite declined to comment. L'Occitane did not respond to
a request for comment. 
    Bankers, however, cautioned take-private deals would remain
challenging for management or private equity investors, as
financing is costly in the current interest rates environment
and fair valuation hard to achieve without a stabilised market.
    "There are definitely more inquiries (about take-private
deals) since the end of last year," said Samson Lo, UBS's
co-head of Asia-Pacific M&A. 
    "The valuation gap is narrowing but there is still a gap,"
he cautioned. "Financing is still a big challenge for any
sizable deals."
    ($1 = 7.8193 Hong Kong dollars)

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BREAKINGVIEWS-Escaping Hong Kong's value trap is far from cheap 
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 (Reporting by Julie Zhu and Kane Wu; Editing by Sumeet
Chatterjee, Stephen Coates and Jamie Freed)
 ((kane.wu@thomsonreuters.com; +85228436590; Reuters Messaging:
kane.wu.thomsonreuters.com@reuters.net))