One Month After Delisting, Li & Fung Picks Up US$100M From JD.com

Family owners of Li & Fung, Fung family to retain majority stake

Hong Kong-based supply chain company Li & Fung has secured a strategic investment to the tune of US$100 million from Chinese Ecommerce giant JD.com, the company announced in a statement late last week.

The Fung family, owners of the Hong Kong family business, will continue to hold control of the company with 60% voting shares from a newly issued capital pool of HK$1.25 (US$0.16 at current rates) per share, the statement said.

The funding from JD.com will be used to grow Li & Fung’s digital supply chain, the statement added. It further said that the two companies will also be partnering on “private label initiatives for the China domestic market.”

“Our goal to create the Supply Chain of the Future and to improve the lives of one billion people in our global supply chain remains more relevant than ever in this turbulent world,” CEO of Li & Fung and fourth-generational heir to the business, Spencer Fung said in the statement.

Prior to the investment, the company ownership was split between the Fung family and Singapore-headquartered logistics solutions provider GLP, who held 40% of voting shares and all of the company’s non-voting shares, according to an earlier statement by the company.

“The partnership with GLP and the addition of JD will be instrumental in further strengthening Li & Fung,” Spencer Fung noted in the statement.

Earlier this year, the 1906-founded company delisted from the Hong Kong Stock Exchange in May, after shareholders approved the privatization proposal. The company originally went public in 1973.

“We move forward with the next chapter of our transformation as a private business while maintaining our commitment to our staff, customers, suppliers, business partners, and the community of Hong Kong,” Group Non-Executive Chairman of Li & Fung, William Fung said about the delisting in the earlier statement.

William Fung was Group Chairman of the company since May 2012, and moved to the non-executive position in June this year.

Li & Fung has been facing profitability struggles. While its operating costs dropped 5.3% as of 31 December 2019, its core operating profits dropped by over four times as much, reducing by 22.9% due to a decreasing turnover and thin margins, according to 2019 annual results announced by the company.

The company’s turnover for the year ending 2019 stood at US$11.4 billion, down 10.1%, due to “continued destocking by customers, store closures and customer bankruptcies,” the announcement noted.

Commenting on the fiscal results, Spencer Fung said, “While our financials were affected by strong headwinds in the retail sector and global markets, we achieved important gains in our goal of creating the Supply Chain of the Future in our recently completed three-year plan.”

He further added that the company was “successfully transforming from a traditional, analog agent into a unique digital supply chain service provider.”

Header image by Erwan Hesry on Unsplash

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