Hong Kong-based trading firm Li & Fung has acquired UK-based Visage Group for up to £173 million ($264 million) to expand its presence in Europe.
The price is split into: an upfront consideration of £55.5 million, of which £13 million has been paid in cash and the balance in loan notes; an additional guaranteed consideration of £2 million that is also payable in loan notes -- £1 million to be redeemed after one year and £1 million to be redeemed after two years; and a contingency payment of £115.5 million, payable only if the business meets certain defined earnings before tax targets that have been agreed between the buyer and the seller.
The contingency payment comprises £52.5 million, payable by way of three-year loan notes, that is based on the earnings between 2010 and 2012, and £63 million, payable by way of loan notes redeemable in 2015, that is based on earnings between 2010 and 2014.
Visage Group has been supplying private-label clothes to high street and mass retailers in the UK since 1981. It employs 500 people across its head office in Manchester and branch offices in Hong Kong, Shanghai, Guangzhou, Dhaka and Delhi. In the year ending January 31, 2009, Visage earned a pre-tax profit of £19.4 million, down marginally from £20.5 million in the previous year.
Li & Fung is buying the Visage shares from: Bank of Scotland Integrated Finance, a unit of Lloyds Banking; Jeremy Hacking Scholes; Raj Kumar Sehgal; and Anita and Sanjeev Mehan. It said in a Hong Kong stock exchange filing that it will finance the deal from its cash reserves.
Li & Fung is one of the world's largest sourcing companies in apparel with customers such as Target and Wal-Mart, and has been using the financial crisis as an opportunity to move into more front-end retailing. In October last year, it bought Wear Me Apparel, a US children's clothes company, for up to $402 million. Li & Fung added $700 million of annual revenues from the Wear Me deal, taking it closer to its stated target of reporting $3 billion of US onshore revenues this year. In 2008 Li & Fung paid $330 million to buy US-based handbag importer Van Zeeland, strengthening its presence in the fashion accessories segment, and $51 million to buy Miles Fashion Group, a German supplier of clothing for men and women.
"We will continue to pursue our acquisition strategy and the pipeline of potential deals is still strong," said Li & Fung president Bruce Rockowitz in a written statement announcing the Visage deal.