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Hillhouse Capital and CDH Investments Led Consortium Proposes to Privatize Belle International

2017-04-28 18:53
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  • Hillhouse Capital Group, joined by CDH Investments and participating Belle International management, propose to privatize the Company by way of Scheme of Arrangement
  • HK$6.30 cash cancellation consideration price per share provides attractive opportunity for Belle International shareholders to monetize their shares in light of the challenging operating environment
  • Cancellation consideration price will not be increased
  • Privatized company will invest in fundamental transformation of the business to enable it to compete effectively in the long-term

HONG KONG, April 28, 2017 /PRNewswire/ -- A consortium consisting of Hillhouse Capital Group ("Hillhouse"), CDH Investments ("CDH") and Mr. YU Wu and Mr. SHENG Fang, Executive Directors of Belle International Holdings Limited (together the "Joint Offerors") today jointly announced that they have requested the board of directors of Belle International Holdings Limited ("Belle International" or the "Company") to put forward to Belle International shareholders a proposal, which if approved and implemented, will result in the company being privatized by way of a Scheme of Arrangement ("the Proposal").

Under the Proposal, the Joint Offerors will pay Belle International shareholders a cancellation consideration of HK$6.30 per share in cash. This represents a premium of approximately 28.38% over the average closing price of HK$4.91 per share for 90 trading days up to and including the Last Trading Day. This also represents 23.60% over the 10 day average closing price of HK$5.10, and a premium of 12.50% over the 52-week closing high of HK$5.60 per share during the year prior to the date of the announcement of the Proposal. This translates to a price to earnings ratio of 18.71 times based on the profit attributable to the Company's equity holders for the twelve months ended 31 August 2016.

At a cancellation consideration of HK$6.30 per share, the total share capital of the Company is valued at HK$53.1 billion. Upon completion of the Proposal, Hillhouse will hold 56.81% of the Company, while CDH will hold 12.06% and other participating management, including Mr. YU and Mr. SHENG, will hold 31.13%.

Entities controlled by the Chairman of Belle International Mr. TANG Yiu and the CEO Mr. SHENG Baijiao, who together hold shares representing approximately 25.75% of the Company's total issued share capital, have irrevocably agreed to vote in favor of the Proposal and dispose of their shares.

An endeavour to facilitate a necessary transformation of the business amid a challenging retail market environment

In recent years, Belle International has experienced unprecedented challenges in its footwear segment. Rapidly growing e-Commerce platforms continue to gain overall footwear market share by offering convenience, attractive pricing and vast product choices. Department stores, which are the Company's primary sales channel, have suffered a significant reduction in foot traffic as a result of competition from both e-Commerce and other retail channels such as shopping malls. Although the Company has explored a variety of initiatives to adapt to the shifting market dynamics, substantive positive impact has been rather limited. Consequently, the performance of the Company's footwear segment has experienced material deterioration, including 13 consecutive quarters of negative same store sales growth since the fourth quarter of the financial year ended 28 February 2014.

"We believe Hillhouse's long-term capital base combined with our digital and operating experience will be able to help Belle International implement the necessary changes needed to revive its business for the Internet era," said Mr. ZHANG Lei, Founder and CEO of Hillhouse Capital.

A CDH representative commented, "We have a long history with Belle International. The privatization proposal would enable the company to focus its resources to undergo a necessary transformation."

The Joint Offerors plan to contribute financial and operating resources and work with the Company to explore and experiment with new retail models, pursue a series of transformative and innovative initiatives, and make significant investments in technology, infrastructure and talent. The Joint Offerors believe that such changes, if successful, may bolster the long-term competitiveness of the Company, but they can be more effectively implemented if the Company is privatized and free from short-term distractions arising from the public equities market, as such type of transformation involves certain degree of risks.

Mr. TANG Yiu, Chairman of Belle International, said, "A transformation is a priority for the Company in order to thrive in the long-term, and now is the right time to pursue the change. With the Joint Offerors pledging long-term support and commitment to the Company, we believe this new arrangement, combining the expertise and resources brought in by the Joint Offerors and the vigor of the Company's new generation management team, will allow Belle International to achieve healthy and sustainable growth. This is the reason our CEO and I agreed to accept the Offer, which we believe will create the right conditions to achieve change."

"Belle International is at a critical moment and needs to be transformed. It has become clear that our traditional retail business model is in urgent need of integration with the digital economy, and an effective new strategy and execution capabilities will be necessary to enable us to compete in the long term. In choosing the right partner, it was important that the Joint Offerors demonstrated a long-term commitment to provide ongoing resources to support the Company's business and possessed the necessary expertise to bring it into the digital age," said Mr. SHENG Baijiao, CEO of Belle International.

The board of directors of Belle International has established an Independent Board Committee, comprised of Mr. HO Kwok Wah George, Mr. CHAN Yu Ling Abraham, Dr. XUE Qiuzhi, and Mr. GAO Yu, being all the independent non-executive Directors, to advise the company shareholders in connection with the Proposal. The Independent Board Committee has appointed Anglo Chinese Corporate Finance, Limited as its independent financial adviser.

The scheme document containing further details of the Proposal will be despatched to the company shareholders as soon as is practicable in compliance with the Takeovers Code and applicable laws.

Bank of America Merrill Lynch is the financial adviser to the Offeror in connection with the Proposal and Kirkland & Ellis is the legal adviser to Bank of America Merrill Lynch. Clearly Gottlieb Steen & Hamilton LLP is the legal adviser to the Joint Offerors.

-End-

This press release appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Joint Offerors or the Company (each as defined below) nor is it a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities of the Company or of the Joint Offerors in any jurisdiction in contravention of applicable law.

Not for release, publication or distribution, in whole or in part, in, into or from any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

About Belle International Holdings Limited

Belle International's business is broadly divided into two segments -- Footwear Business and Sportswear and Apparel Business.

Company-owned footwear brands include Belle, Staccato, Joy & Peace, Millie's, JipiJapa, Mirabell, Tata, Teenmix, Senda, Basto, SKAP, :15MINS, etc. Distribution brands include Bata, CAT, Clarks, Hush Puppies, Mephisto, etc.

For company-owned brands, the Company mainly adopts a vertically integrated business model which covers product research and development, procurement, manufacturing, distribution and retailing. For distribution brands, the Company operates the business in two different models, brand licensing and retail distribution.

The majority of Sportswear and Apparel Business is in the form of retail distribution, including sportswear brands Nike, Adidas, Puma, Converse, etc. and apparel brands MOUSSY, SLY and REPLAY.

As at 28 February 2017, Belle International's total number of company-managed retail outlets was 20,716 in Mainland China. The Company also managed more than 100 retail outlets in Hong Kong and Macau.

About Hillhouse Capital

Founded in 2005, Hillhouse Capital is a global firm of investment professionals and operating executives who are focused on building high quality business franchises that achieve sustainable growth over the long-term. Hillhouse Capital takes a long-term approach toward investing and partners with exceptional entrepreneurs to create value.  Independent proprietary research and industry expertise, in conjunction with world-class operating and management capabilities, are key to Hillhouse Capital's investment approach.  Hillhouse Capital invests in the consumer, TMT, healthcare, advanced manufacturing, financials and business services sectors in companies across all equity stages. Based in Asia, Hillhouse Capital and its group members manage over US$25 billion in assets on behalf of institutional clients such as university endowments, foundations, sovereign wealth funds, and family offices.

About CDH

Established in 2002, CDH Investments is one of the largest alternative asset management institutions focused on China today with over US$17 billion in assets under management, as of 31 December 2016. From its roots in private equity, CDH Investments has expanded to become a diversified alternative asset management platform covering: Private Equity, Venture and Growth Capital, Real Estates, Mezzanine & Credit, Public Equities and Wealth Management. CDH Investment has more than 100 investment professionals working in offices in Hong Kong, Singapore, Beijing, Shanghai, and Shenzhen. CDH's core principle is to create value for all of its partners, including investors and portfolio companies.

Hillhouse Capital
Hillhouse Capital

 

CDH Investments
CDH Investments

 

Belle International Holdings Limited
Belle International Holdings Limited

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Source:
Hillhouse Capital Group
CDH Investments

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