Hong Kong-based global consumer goods exporter Li & Fung Limited announced that it has agreed to acquire all of the outstanding shares of American Marketing Enterprises Inc, known as AME and its related companies.
AME is the premier children’s entertainment character licensed private label sleepwear company in the United States.
Mr. William K Fung, Group Managing Director of Li & Fung Limited, commented, “Our US onshore business has grown significantly since its inception a few years ago.
After our previous successful acquisitions, including Regatta, Oxford Womenswear Group and the Rosetti handbag business, we are pleased to have this opportunity to further expand our portfolio.
We believe this acquisition will establish LF USA, the US subsidiary of Li & Fung, as a leader in the children’s sleepwear business.”
Acquisition of American Marketing Enterprises:
The total purchase consideration is approximately US$128 million and will be financed by Li & Fung's internal cash reserves. Completion of the acquisition is expected to take place by end of November.
American Marketing Enterprises’ brand portfolio holds over 40 licenses with top licensors and includes Spiderman, Hanna Montana, High School Musical, Cars, Dora the Explorer, Barbie, Disney Princess and many other leading evergreen properties.
AME designs, sources and markets its brand portfolio to leading US retailers such as Wal-Mart, Kohl's Target, Sears Holdings, Toys"R"Us and J.C. Penney.
Mr. Bruce Rockowitz, President of Li & Fung (Trading) Limited, said, “Undoubtedly, the acquisition will establish LF USA as the leader in the children’s licensed sleepwear industry, providing greater breadth of licenses and depth of customer relationships through the use of a portfolio of evergreen character and entertainment licenses.
The acquisition will also provide significant synergies with Briefly Stated Holdings Inc, which we acquired in 2005, and its extensive portfolio of cartoon character licenses. We expect the acquisition will help accelerate the future growth of our business in the United States.”
For the fiscal year ended 31 December 2006, American Marketing Enterprises' net sales were approximately US$140 million, and profit before tax was approximately US$14.9 million.
Property Transactions:
Li & Fung also announced that it has entered into sales and purchase agreements with Li & Fung (1937) Limited’s indirectly wholly owned subsidiaries for the disposal of five subsidiaries which principally own the Group’s properties in Hong Kong.
At the same time, Li & Fung will lease back the properties which have a remaining term of one month followed by three consecutive options exercisable by the Group over a period of nine years.
These transactions are in line with the Group's longstanding asset-light strategy which includes, if possible, not owning factories or properties.
The transactions are subject to approval by the Independent Shareholders at the SGM in December 2007 and will be executed on an arms-length basis. The properties will be sold at a price of HK$1, 401.5 million based on the average of two independent market valuations of the properties.
As a result of the disposal, the Group is expected to record an unaudited gain of approximately HK$449 million in aggregate after deducting estimated expenses of approximately HK$15 million.
The Group will lease back the same properties with a rental equivalent to the average of the aggregate open market rent of the properties subject to a maximum rental of approximately HK$72 million per annum for 2008, 2009 and 2010.
Mr. Bruce Rockowitz, President of Li & Fung (Trading) Limited, said, “These transactions are consistent with our overall asset-light strategy and provide considerable benefits to Li & Fung.
Firstly, the sales will furnish the Group with a liquid and healthy balance sheet upon completion. Additionally, the sale will provide immediate access to long-term leases at reasonable rents, which is important for our operations. At the same time, the net proceeds from this transaction will help finance future acquisitions.”
