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Li Ning Raising US$1.3 Billion In Fresh Capital To Fund Overseas Expansion

China's biggest sportswear maker to issue 120 million new shares at HK$87.50 each to outside investors and an equal number to major shareholder Viva China Li Ning's net profit nearly triples to US$306 million in the first half as revenues surge 65 per cent

Li Ning Raising US$1.3 Billion In Fresh Capital To Fund Overseas Expansion

Li Ning, China's biggest sportswear manufacturer, is seeking to raise HK$10.4 billion (US$1.35 billion) from a stock placement, triggering a sell-off at the same time after brokerage KGI Securities downgraded key players in the sector.

The company proposed to issue 120 million new shares at HK$87.50 each to outside investors, to fund an overseas expansion and enhance its brands and supply chain system among others, according to a Hong Kong stock exchange filing on Thursday.

It will also make a separate top-up placement of the same amount of shares at the same price to its major shareholder, Viva China, to restore its shareholding in the company. The price is about an 8 per cent discount to the closing level on Wednesday.

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Shares of the athletic apparel producer slumped 8.1 per cent in Hong Kong, the most in three months, while the broader market slipped 0.4 per cent amid concerns about weak earnings outlook.

The fundraising will also help strengthen the group's financial position and to broaden Li Ning's shareholder base to facilitate its future growth, as well as to increase the liquidity of Li Ning shares, the company added in the filing.

The stock placement came as KGI Securities downgraded Li Ning and its peers Anta Sports Products and Xtep International to underperform, according to Bloomberg data. China's economic growth slowed to 4.9 per cent last quarter as the manufacturing engine faltered.

With China's huge population base, retail consumption remains a key driver of economic growth, accounting for 62 per cent of gross domestic product in the first half. Li Ning's planned overseas expansion will test whether its brands would also enjoy the same success at home.

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Li Ning's net profit almost tripled to 1.96 billion yuan (US$306 million) in the first half as revenues grew by 65 per cent. Its same-store sales rose by more than a fifth in the September quarter, despite cutting its points of sales to 5,803 from 5,912 at the start of the year. Net profit rose by 13 per cent to 1.7 billion yuan in 2020.

The company, which has sponsored the likes of NBA basketball superstars Shaquille O'Neal and Dwyane Wade, also manufactures and sells various sports products that are either owned by the company or licensed to the group, including Aigle, a joint venture company with the French sports apparel maker.

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