Shares of Hong Kong tycoon Victor Fung Kwok-king’s menswear retail unit Trinity surged 32 per cent after Shandong Ruyi Group, one of China’s largest textile firms, agreed to take control of the firm struggling to cope with fast shifting consumer behaviour.
Shandong Ruyi, 51 per cent owned by chairman Qiu Yafu, has agreed to buy 1.85 billion new Trinity shares at HK$1.2 each, totalling HK$2.22 billion. The deal, when completed, will give Shandong Ruyi 51 per cent control over Trinity, while Fung and his family members will see their combined stake diluted from 40.95 per cent to 19.79 per cent.
The selling price represented a 60 per cent premium to Trinity’s closing price of 75 cents on Wednesday before trading was suspended. Trinity operates retailing and licensing businesses in Greater China and Europe selling menswear brands. Over two years ago, Trinity signed soccer legend and fashion icon David Beckham in a five-year deal to be the face of the Kent & Curwen label.
It incurred net loss of HK$257 million in the year’s first half compared to a loss of HK$200 million in the same period last year, amid what it called a “depressed retail environment” in the mainland - its biggest market. Shandong Ruyi has grown from a modest textile factory set up 45 years ago into a major integrated textile empire spanning raw material cultivation, textile processing and design, marketing of brands and apparel. Operating 3,000 retail points of sale in Asia-Pacific, it has three listed subsidiaries in China, France and Japan.
Last year it acquired a majority stake in French fashion group SMCP - the parent company of Sandro, Maje and Claudie Pierlot. It plans to use the shares sale proceeds to retire debt, fund potential acquisitions and bolster working capital.