Giordano Sells Main Garments

Giordano International announced the sale of its main garment manufacturing Affiliated Companies Placita Holdings Limited 51% interest to Placita management.

The company will gradually reduce its garment manufacturing business and focus on developing the retail business in the mainland.

According to the paction agreement, Giordano will sell its Placita 21% interest in the first stage, while the remaining 30% will be sold by option. The buyer has the interest of Placita 49% at present.

Placita is Giordano's main garment manufacturing Affiliated Companies. It has factories in Guangdong, Shenzhen, Dongguan and Shandong Yantai, which provide clothing products for Giordano and many third party customers.

At this stage, Giordano will sell its Placita 21% interest at HK $22 million 900 thousand, which is estimated to be worth about $12 million 600 thousand.

After the paction is completed, the remaining 30%Placita interest will be converted into a 6 million 100 thousand yuan preferred stock without voting rights. The group has a put option, which can be valued at 27 million 800 thousand yuan at any time from the completion of two years of paction, and the entire preferred stock will be sold to the buyer. Meanwhile, the buyer will be granted the option to purchase the full preferred stock at the price of 32 million 700 thousand yuan within five years after the completion of the paction.

Liu Guoquan, chairman and chief executive officer of Giordano, said that in the long run, the group will gradually reduce its garment manufacturing business and focus on developing its retail business in the mainland. In the future, it will tend to purchase abroad, and internal purchases will drop from 25.7% in 2006 to 16.2% last year, of which 13.4% from Placita.

Earlier, the group has reduced its rights and interests in the fast moving globe made by the joint venture company in Dongguan, which has been substantially reduced from 49% to 9.9%. It can be seen that the group has basically faded out of the garment manufacturing industry. The proceeds from the sale of Placita 21% are expected to be used as a whole to expand the retail business in China.