China’s Olympic gymnast Li Ning mulls buying out his sportswear company as ailing Hong Kong market spurs take-private deals

A number of global and regional private equity firms, including TPG, PAG and Hillhouse Investment, have been tapped to see if they are interested in joining as an investor, two of the people said.

The discussions to take Li Ning Co private are in the early stages and details have not been finalised, said the sources, who declined to be identified as the information was confidential. Li Ning made its Hong Kong debut in 2004.

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The company’s shares jumped as much as 20 per cent to HK$24.55 following the Reuters report on Tuesday, the highest since November.

Beijing-headquartered Li Ning Co said in a response to Reuters that it had “not received any information regarding this matter as of now.”

Li did not immediately respond to a request for comment sent via the company.

TPG, PAG and Hillhouse declined to comment.

Stock markets in Hong Kong and mainland China have tanked over the past year amid China’s economic slowdown, a lack of strong stimulus policies and geopolitical tensions.

Hong Kong’s Hang Seng Index slumped 14 per cent in 2023, while China’s benchmark CSI 300 index fell 11 per cent.

Li feels his company is undervalued in Hong Kong and would target a hefty premium over its current share price in a potential buyout, two of the sources said.

He did not have an imminent plan to relist his company on the mainland, one of them added.

Li Ning Co was the worst-performing blue-chip stock on the Hong Kong bourse in the past year, down nearly 70 per cent as of Monday, LSEG data showed. That compares with a 25 per cent drop in main rival Anta Sports.

Li was regarded as China’s “gymnastics prince” after winning six of the seven gold medals at the 1982 World Cup Gymnastic Competition, and carried on to win six medals at the 1984 Los Angeles Olympic Games.

Li Ning Co said in December it would buy a Hong Kong commercial and retail property from Henderson Land for HK$2.21 billion as its headquarters in the city, which sent its shares to a three-and-a-half-year low on the day of the announcement.

Li also said at the time he planned to repurchase up to HK$3 billion of shares from the open market in the next six months, his first such move in its corporate history, according to Citigroup analysts.

In the announcement, the company’s board said it believed its current share price was “below its intrinsic actual value.”

A number of Hong Kong-listed companies including French skincare company L’Occitane and American luggage maker Samsonite have also recently engaged with advisers and investors about potential take-privates, separate sources said.

Samsonite declined to comment. L’Occitane did not respond to a request for comment.

Bankers, however, cautioned that take-private deals would remain challenging for management or private equity investors, as financing is costly in the current interest rates environment and fair valuation is hard to achieve without a stabilised market.

“There are definitely more inquiries [about take-private deals] since the end of last year,” said Samson Lo, UBS’s co-head of Asia-Pacific M&A.

“The valuation gap is narrowing but there is still a gap. Financing is still a big challenge for any sizeable deals.”