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HONG KONG, China — Shares of global sourcing firm Li & Fung Ltd jumped to their highest in more than a year on Friday as investors cheered better-than-expected earnings and focused on a new three-year plan that includes spinning off its brands and licences unit.
Li & Fung, which supplies retailers like Kohl's Corp and Wal-Mart Stores Inc with clothing, toys and other products, said after the market closed on Thursday that it plans to list the new company, Global Brands Group, in Hong Kong this year, subject to approval.
The company said it would not raise new funds through the listing, in which each Li & Fung shareholder would receive a stake.
"To shareholders, it is good news. Existing shareholders will benefit as they will get both shares at the same time. It's like having a candy, as a spinoff can help release the underlying value of a stock much earlier," said Alex Wong, a director at Hong Kong-based brokerage Ample Finance Group.
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He cautioned, however, that the operating environment for the brands business is still difficult and challenging.
Li & Fung has traditionally relied on acquisitions to fuel growth, a strategy some analysts have questioned, and the company has slowed its M&A drive over the past year.
Global Brands carries names including Cole Haan, Tommy Hilfiger, Disney, Calvin Klein and Juicy Couture.
If the spinoff goes ahead, Li & Fung chief executive Bruce Rockowitz will lead Global Brands Group, while Spencer Fung, the eldest son of Honorary Chairman Victor Fung, will replace Rockowitz at the global sourcing company.
Fung is currently chief operating officer at Li & Fung.
On Thursday, the company posted a net profit of $725 million for 2013, beating forecasts of $577.1 million, according to Thomson Reuters' Starmine SmartEstimate.
Li & Fung's shares jumped as much as 19 percent to HK$12.26, their highest since January 2013, outpacing a 0.3 percent rise in the benchmark Hang Seng Index.
In August, the company said first-half net profit tumbled nearly 70 percent to its lowest level in eight years on sluggish demand in Europe and the United States, but said it was on track to recover for the whole year.
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Editing by Anne Marie Roantree and Stephen Coates
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