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SBD Global/October 18, 2012/Finance

Li Ning Selling $175M Stake In His Sportswear Brand To Talent Management Firm

Former Chinese Olympic gymnast Li Ning announced that "a 25% stake" in his namesake sportswear brand will be sold to Viva China Holding, a sports talent management and consultancy that is also owned by Li, according to Zhao Qian of the GLOBAL TIMES. Li said the move "was aimed at transforming its business model." The sportswear company said that two of its shareholders, Victory Mind Assets and Dragon City Management (PTC), "have agreed to sell their stakes to Viva for $175M." Li is the founder of Li Ning, and his family members are the principal owners of Victory Mind Assets and Dragon City Management. The  acquisition will see Li reducing his involvement in the sportswear company. Li and his family hold around 70% of Viva. CIC Industry Research Center's Xiong Xiaokun said, "Li Ning will probably enter the sports-related real estate sector." One of Viva's major businesses is construction of a "sport community," which combines sports facilities and residential community development (GLOBAL TIMES, 10/18).

STOCK RALLIES ON NEWS: REUTERS' Donny Kwok reports shares of Viva China "more than doubled on the news." However, Li Ning, the company that operates around 7,300 branded sports stores across China, dropped on the Hong Kong stock market "as investors said the deal suggested the group's founder was gradually giving up direct control of the business." Bank of America Merrill Lynch said that the Li family's "stake in the listed company would be diluted" to 17.64% from 25.23%. However, shares of Chinese sportswear brand Anta Sports "benefited from the doubts about Li Ning" (REUTERS, 10/17). The WALL STREET JOURNAL's Laurie Burkitt noted Li Ning is "in the midst of a major business overhaul, replacing its senior management and repositioning its brand as a part of a three-year transformation program aimed at improving profitability and taking broader market share in China's apparel market" (WSJ, 10/16). The WSJ's Duncan Mavin reported Li Ning shares fell 4.8% on Wednesday. However, Li "isn't cashing out," merely he has "shuffled his Li Ning his Li Ning stake at a premium price into a relatively cash-rich vehicle he controls." Viva's minority investors "now benefit from any Li Niung upside, which helps explain why its shares jumped sharply Wednesday." But Li has also "significantly limited his downside in Li Ning, too" (WSJ, 10/17).
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