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Pou Chen proposes to privatise Pou Sheng

Jan 23, 2018 Hong Kong
Pou Chen proposes to privatise Pou Sheng
Shares of Pou Sheng climbed to an historical high yesterday after the company announced it would receive 6.8 billion Hong Kong dollars (860 million US dollars) from its proposed privatization. The company is Yue Yuen's retail arm
Pou Chen, Pou Sheng and Yue Yuen jointly announced that Pou Chen had requested the board of Pou Sheng to put forward a proposal to its shareholders for its privatization. Under the proposal, Pou Chen will pay Pou Sheng shareholders the Cancellation Price of 2.03 Hong Kong dollars per share in cash, valuing Pou Sheng at approximately 10.9 billion Hong Kong dollars.

The proposal also involves Yue Yuen effectively disposing of its 62.41% stake in Pou Sheng to Pou Chen for a total consideration of approximately 6.8 billion Hong Kong dollars and will be subject to approval from the independent Yue Yuen shareholders at a Special General Meeting. Yue Yuen intends to distribute virtually all the net proceeds of the disposal to its shareholders by way of a one-off special dividend.

Independent board committees have been established by both the Pou Sheng and Yue Yuen boards to make recommendations to their respective shareholders as to whether the terms of the proposal and the scheme are, or are not, fair and reasonable. Independent financial advisors will be appointed by both boards in due course.

The parts have mentioned some reasons for the decision, namely the increasing competetion and the growth of the online shopping. The sporting goods industry, in which the Pou Sheng Group is a market player, is experiencing unprecedented changes and challenges, in particular the rise of online shopping, as seen from the rapid growth of e-commerce platforms, the integration and collaboration of online and offline operators as well as the change in consumers’ expectations on good shopping experiences with online and offline channels complementary to each other. The increased market competition has been leading to more aggressive and frequent promotions among sportswear brand customers and various market players are experimenting new store formats. In this context, the Pou Sheng Group has been exploring and investing heavily in a variety of initiatives to adapt to the shifting market dynamics.

To allow the Pou Sheng Group to explore and adapt to such a challenging environment, it is expected that significant investments are required to implement the aforesaid initiatives and further enhance Pou Sheng’s current business, which may involve execution risks that could impact on Pou Sheng’s share price in the near term. The decision to make the proposal to privatize Pou Sheng was taken in order to ensure the flexibility of business operation, as well as enable Pou Sheng to access more advantageous financing and internal treasury systems.

A spokesperson for Pou Chen said: “The sporting goods industry, in which the Pou Sheng Group is a market player, has demonstrated remarkable growth potential. While Pou Sheng has explored and implemented a variety of initiatives to capitalize on these opportunities, the industry is undergoing an unprecedented 3 transformation which has created a volatile and challenging retail environment for Pou Sheng. We believe the privatization plan will allow Pou Sheng to gain better access to resources from Pou Chen to execute its restructuring plan.” The scheme document containing further details of the Proposal will be sent to shareholders as soon as practicable.

Since the announcement of the privatisation the shares of the company have been on the high in the market.

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