Looking to expand its sourcing clout, Luen Thai Holdings Ltd. has acquired Ocean Sky Global (S) Pte. Ltd. for $55 million in cash.
The Ocean Sky Group is a global one-stop specialty manufacturer with supply chain management capabilities, and targets customers globally through production sites in Cambodia and Vietnam, and sourcing operations in Singapore and Hong Kong, Luen Thai noted. With a portfolio of clients that includes well-known international apparel companies, Ocean Sky Group had annual sales of $254 million last year, with a production of about 60 million garments and over 8,400 employees. The current management team of the Ocean Sky Group will be kept in place.
Luen Thai said its board believes that, through the acquisition, it can diversify its production bases outside China in countries with relatively low labor costs, expand its customer base and increase its competitiveness. In 2012, Luen Thai had revenue of $990 million, with a production of about 90 million units of apparel and accessories, more than 33,000 employees worldwide and main production bases in China, the Philippines and Indonesia.
“The addition of OSG is a further realization of our China Plus ASEAN strategy in operation,” said Henry Tan, chief executive officer of Luen Thai.
Tan was referring to a strategy of companies with major sourcing in China that have sought out other countries for alternative sourcing as that country’s labor costs have risen and as it aims to shrink exports in favor of production for domestic consumption. The Association of Southeast Asian Nations consist of Brunei Darussalam, Burma/Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
“With the industry undergoing consolidation, Luen Thai…will continue to look for acquisition targets such as OSG that will maximize growth and returns to shareholders,” Tan added.