Li & Fung Ltd. said Monday that its subsidiary IDS Group Ltd. is selling LF Asia (Taiwan) Ltd. to ILC International Corp. for a minimum cash amount of $54 million.
LF Asia operates the Roots brand vertical retail network in Taiwan.
Li & Fung said the sale will generate a $36 million gain, which will be “used for future acquisitions.”
The purchase price could be adjusted upward, but the cash consideration shall be no more than $65 million, the company said. It noted that $27 million will be paid in cash at the completion of the deal, with the balance based on a schedule to be agreed upon between IDS and ILC that will not extend beyond Dec. 31, 2013.
The sale is considered a connected transaction under Chapter 14A of the Listing Rules of the Hong Kong Stock Exchange, where Li & Fung is traded.
IDS Group was acquired by Li & Fung in 2010 and became an indirect wholly owned subsidiary. LF Asia was acquired by IDS in 2009, and Li & Fung said it was selling the business because it was transforming to a brand-licensing model from its current integrated retail operation.
ILC is an indirect wholly owned subsidiary of Fung Holdings (1937) Ltd., a substantial shareholder of Li & Fung.