Li & Fung To Spin Off Furniture Division, Whalen

Li & Fung Ltd. has entered into a strategic transaction under which Hony Capital and the Fung Group will acquire three of its vertical product businesses, furniture, sweaters and beauty, for an estimated cash price of $1.1 billion.

The furniture vertical includes the Whalen, True Innovations and Kenas operations.

In its 2017 Interim Report, entitled “Building the Supply Chain of the Future,” Li & Fung stated that furniture had demonstrated strong growth momentum as the company introduced more differentiated products to diversified retail channels. Still, the company is divesting the verticals, to a consortium that includes the Fung Group, parent of Li & Fung, to focus investment on supply services for retailers including Walmart.

Li & Fung has spun off other non supply chain businesses over the past few years including its Global Brands licensing operation. The company organized the vertical operations in 2015 to consolidate trading businesses in furniture, sweaters and beauty. The company added that additional growth in the verticals would require capital investment and management attention that it believes could be better achieved outside of Li & Fung given its present strategic supply chain-oriented direction.

Spencer Fung, group CEO of Li & Fung, said, “The strategic divestment of the product verticals allows Li & Fung to focus on its core competencies and further strengthens our capital structure. 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 first half results were solid, and our customers and vendor partners are responding very positively to our new digital solutions.”

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