The Fung family plan to take Li & Fung private
Business

Family owners look to take back control of listed businesses as stocks plummet

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It’s an ill wind that blows no one any good, and plunging markets have presented owners of listed family businesses with a unique opportunity to take back control.

The process has already started in Asia, where markets have been lower for longer. According to the South China Morning Post, citing data from DealLogic, private deals in Asia Pacific totalled $14.6 billion in the first quarter, against $290 million a year ago.

Investment bankers believe families are interested in taking control at a sensible price. But they are also keen to work through the challenges posed by the coronavirus virus, away from the public eye

Private equity funds are sitting on $1.5 trillion which can be deployed to help families, and others, to pull off deals. 

Blue-chip companies in Hong Kong are trading beneath their book value for only the third time in 30 years.  Before the coronavirus crisis, they were hit for six by student riots against the Chinese authorities in Hong Kong last year. 

Billionaire Peter Woo is taking his Wheelock & Co property company private through a $2.1 billion deal. The Fung family and Singapore-based GLP Group plans to privatise supply chain manager Li & Fung for $930 million. The Wu family pushed through a HK$2.7 billion privatisation of property group Hopewell last year. Developer Soho China has received a $4 billion offer from US private equity firm Blackstone.

Investment bankers believe families are interested in taking control at a sensible price. But they are also keen to work through the challenges posed by the coronavirus virus, away from the public eye. 

Families have occasionally taken their businesses private when their share price is lagging, and restructuring is required. Michael Dell, for example, used his family office to help privatise his US computer corporation in 2013 and profited when it returned to the market in 2018. 

Investment bankers agree privatisation will become a global trend this year, once would-be bidders have worked out the implications of the current crisis. 

The takeover bid for Moss Bros by Michael Shina’s Crew Clothing is the latest in a clutch of bids for UK companies following Brexit, and more deals are on the cards. 

Some bankers argue, however, that families may not want to pile further uncertainty onto the challenges faced by their businesses. 

Some families also find it hard to achieve a consensus on the best way forward.

One banker said: “There is a feeling out there that it looks distasteful for a bidder, or a banking adviser, to bid for a company brought low by coronavirus.” 

Even so, over time, families need to realise, like Michael Dell, that their businesses could benefit from their patient approach, as opposed to the rampant short-term speculation which has lately been damaging their wealth.

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