Li Ning has Reportedly Engaged with Investors to Consider Privatization

Consumer Staples Author: EqualOcean News, Xiaoran Zhang Mar 13, 2024 04:20 PM (GMT+8)

Li Ning is contemplating privatization, seeking capital support to drive brand growth.

Li Ning Sports shoes brand logo

According to the latest reports, former Olympic champion Li Ning is actively considering leading a consortium to acquire his eponymous sportswear company and privatize it on the Hong Kong Stock Exchange. This decision arises from the perceived undervaluation of the company's market value in Hong Kong stocks. Li Ning has engaged with multiple private equity firms, including TPG, PAG, and Hillhouse Capital, to explore potential investments. However, it is indicated that discussions are still in the early stages, with details yet to be finalized. The news triggered a 20% surge in the company’s stock prices, reaching a market cap of HKD 571.17 billion as of March 12. Later that evening, the company issued a statement and denied knowledge of any reasons for such changes.

As of now, the financial report for Li Ning in 2023 is yet to be disclosed. Preliminary data, though, suggests a downward trend in online sales during the first three quarters of 2023. Even in retail revenue, the growth rate for Li Ning in the second quarter ranged between 10%-20%, but by the third quarter, it dwindled to single-digit growth. Faced with this decelerating growth, Li Ning implemented measures in 2023, attempting to boost stock prices and overall performance. On December 10, 2023, Li Ning's indirect wholly-owned subsidiary, High Match Limited, signed an agreement to acquire a property investment company from Henderson Land Development Company Limited for HKD 2.208 billion. On December 12, Li Ning Limited announced a share buyback plan, intending to utilize up to HKD 3 billion to repurchase shares. Following these announcements, the company's stock experienced a partial rebound.

In addition to stimulating the stock market, Li Ning has continued its market expansion. In late December 2023, Li Ning's affiliate, Leane Capital Partners Fund, acquired 100% ownership of the Nordic outdoor brand "Haglöfs AB" (Matchstick) - a strategic addition to the Li Ning brand portfolio, which already includes Li Ning, self-created luxury brand LNG, Hong Kong-based fashion brand Feiyue, Italian centennial luxury brand Diadora, and the British centennial footwear brand Clarks. Analysts view Li Ning's move as a strategic bet on the potentially vast outdoor market and a response to strong competitors like Anta, Xtep, and Peak.

Regarding the privatization rumors, analysts suggest that Li Ning's choice to go private may facilitate long-term investments and nurturing of the brand, aiding in a profound brand transformation. Whether this established Chinese streetwear brand can break free from its current lackluster performance and return to the forefront remains to be tested by the market.