Singapore state-owned investment company Temasek has agreed to take a 21.7 percent stake in Li & Fung’s wholly owned logistics subsidiary, LF Logistics, for around US$300 million, valuing the company at around US$1.4 billion, the Hong Kong-listed company said in a filing to SGX Friday.
“The board believes that the investment would allow the company to unlock the value of LF Logistics and accelerate its business growth, as well as further enhance the capital structure and the financial flexibility of the group,” supply chain manager Li & Fung said.
The proceeds from Temasek’s investment will be used to fund future capital expenditure, repay existing bank facilities and accelerate business growth initiatives, the filing said.
The investment values LF Logistics at a price-to-earnings ratio of around 22 times, based on 2018 net profit after tax of US$62.70 million, the filing said.
Due to the investment, Li & Fung said it would postpone the proposed spin-off IPO of LF Logistics until further notice. The company said it had floated the plan to seek the IPO in its 2018 annual report, but has since been considering market conditions and geopolitical uncertainties.
The final amount of Temasek’s investment is subject to adjustment for net debt, Li & Fung said.
LF Logistics is a pan-Asian logistics service provider, operating in-country logistics around the region as well as a global freight management business, the filing said, adding it has benefited from rising middle-class consumption in Asia and growth in e-commerce logistics.
The deal is subject to conditions including antitrust approval in South Korea, the filing said.
The investment will be made via Temasek’s indirect wholly owned subsidiary Dahlia Investments, Li & Fung said.
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