Hong Kong supply chain company Li & Fung on Wednesday announced it would sell its logistics business to Danish marine giant AP Moller-Maersk in a deal with an enterprise value of $3.6 billion.
Li & Fung said it would also form a long-term strategic partnership with Maersk.
It more than doubles LF’s valuation from 2019 of $1.4bn when Temasek, Singapore’s state-backed investment company, bought its stake.
Analysts said the deal would give the ocean shipping giant a network of warehouses. Jorgen Lian at DNB in Oslo said the acquisition was a “substantial expansion” for Maersk but at a heady price.
Subject to regulatory approvals, the transaction is expected to close in 2022.
“The partnership will enable both companies to utilise their respective resources and global networks to create a comprehensive range of end-to-end global supply chain services,” the Hong Kong company said.
LF Logistics is 78.3% owned by Li & Fung, with the remainder held by Temasek, the Singapore sovereign wealth fund.
The strategic partnership follows the recent formation of LFX, focusing on digital ventures, investments and supply chain finance with GLP, its Singapore-based partner.
“The divestment of LF Logistics will further simplify our business to focus on our core trading and supply chain digitalisation capabilities, which have seen a strong rebound,” Spencer Fung, Li & Fung group executive chairman, said.
Li & Fung revolutionised retail outsourcing by slicing customer orders into smaller groups and sourcing them individually to factories which had available capacity.
Removed from Hang Seng
However, the company struggled in the era of e-commerce. In 2017, the sourcing group sold off its clothing, furniture and beauty products business to the founding Fung family and Chinese private equity house Hony Capital for $1.1 billion.
That year, Li & Fung was removed from the blue chip Hang Seng index and replaced by Geely Auto. It was delisted in 2020.
The company, which helps retailers from Walmart to Kohl’s source their products, said at the time that the disposal would streamline its business and give it extra capital and time to invest in its logistics and supply chain businesses.
Li & Fung was founded in 1906 by Guangzhou porcelain merchant Li To-ming and English teacher Fung Pak-liu, who exported ceramics, fireworks, handicraft and silks to North America and Europe.
They later became compradors – middlemen – for the British colony of Hong Kong when Fung’s son opened Li & Fung’s first branch there in 1937.
- George Russell
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