Li & Fung Said to Work With Citigroup on Brands Unit Spinoff

Li & Fung Ltd. is working with Citigroup Inc. to spin off its brands business, valued at about $2 billion, people with knowledge of the matter said.

The world’s biggest supplier of clothes and toys to retailers such as Wal-Mart Stores Inc. and Kohl’s Corp. plans to list the division on Hong Kong’s stock exchange and would also consider selling the unit, named Global Brands Group, if it gets an attractive offer, said the people. They asked not to be identified because the deliberations are private.

Li & Fung, based in Hong Kong, said last month it plans to spin off the licensing and brand business, whose products include Coach Inc. shoes, to focus on its core business, which sources and manages the supply chain for retailers. The company’s shares posted their biggest one-day gain in more than five years after the announcement.

Spokesmen for Li & Fung and Citigroup declined to comment.

Li & Fung said March 20 that it would spin off and list the brands unit, which manages more than 300 licensed brands including belts from Michael Kors Holdings Ltd. and some Juicy Couture clothing.

Different Expertise

Should regulators approve the listing, the new Global Brands Group would be headed by current Li & Fung President and Chief Executive Officer Bruce Rockowitz. Spencer Fung, currently Li & Fung’s chief operating officer, will take over from Rockowitz.

Li & Fung’s shares fell 0.7 percent to HK$11.98 as of 11.42 a.m. in Hong Kong trading, compared with a 0.8 percent decline in the benchmark Hang Seng Index.

The Hong Kong company’s core business is sourcing and managing the supply chain for retailers, “which is very different from nurturing the brands,” its billionaire Chairman William Fung said in an interview with Bloomberg Television last month, a day after the announcement, explaining the split.

The company, which supplies U.S., European and Asian retailers with clothes, toys and furniture and traces its beginnings to 1906 when its parent Li & Fung Group was founded, reported 2013 profit that beat analyst estimates on March 20.

Net income rose 17 percent to $725 million in 2013 as profitability improved across divisions, surpassing the $594.2 million average of 14 analysts’ estimates compiled by Bloomberg.

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