Qatar Investment Bureau HK $4 Billion 783 Million Shares In SOGO'S Parent Company

In October 20th, Li Fu International announced that the largest sovereign fund in the Middle East, the Investment Bureau of Qatar (hereinafter referred to as QIA) and the controlling major shareholders reached a share purchase agreement to purchase 324 million shares of HK $14.75 per share, equivalent to 19.9% of the issued share capital of the company and 4 billion 783 million of the Hong Kong dollar.

After the completion of the paction, QIA will replace Zhou Dafu as the second largest shareholder to share the proceeds of Hongkong's SOGO and the mainland's Jiu Guang Department store.

The UK quoted the insider of the fund as saying that the $616 million investment is only the start of QIA's new investment plan of $15 billion in Asia. The plan focuses on mainland China, Japan and South Korea.

Informed sources close to the deal told reporters that Liu Luanhong, chairman of Li Fu, hopes to further upgrade the brand image of SOGO and Jiu Guang with QIA's experience in running the UK's top department stores Harrods and share Tiffany & Co. to maintain growth momentum.

QIA hopes to establish long-term strategic partnership with the two largest families in Hongkong (the Liu Luanhong family and the Zheng Yutong family) through this stake.

After the completion of the paction, the total shareholding of the Liu Luanhong family and the Zheng Yutong family will be reduced from 47% and 26% to 37% and 16% respectively. QIA has become the second largest shareholder outside Liu's name, and will nominate a candidate to be a non-executive director of the international board of directors of Li Fu and be tied up with Zheng Yutong and Zheng Jiachun.

Since October last year, the Zheng family has sold Li Fu shares for a total of HK $4 billion 272 million.

Due to the sharp reduction in the number of major shareholders, the price of riff international plunged to HK $13.54 in early October 20th, reaching a new low of 52 weeks, with a drop of 7.3%.

The stock price stabilized in the afternoon, and the last 15 minutes came out of the news that Li Fu could be privatized. Its share price soared and closed at HK $14.80, up 1.4%.

Refund of foreign capital

QIA official statement said: "this stake in Li Fu International has further extended the direction of our global portfolio diversification.

Considering the strong fundamentals and good prospects of Li Fu, we have always wanted to be a long-term investor in this kind of quality business by relying on the experience of investing in high-end retailers for many years.

The QIA spokesperson replied to the twenty-first Century business reporter's enquiry by e-mail, saying that joining Li Fu International will enrich the fund's combination in the retail consumption field, and will have beneficial complementary effects with other high-end investments including Harrods and Tiffany & Co.

He revealed that the direction of diversified investment will take place in Asia this time.

The controlling shareholder Real Reward is respectively owned by Liu Luanhong family's United Goal Resources Limited and Zhou Dafu enterprise affiliated Go Creat Limited each holding 50% stake.

After the completion of the paction, Real Reward's stake in rifle will fall from 52.17% to 32.27%.

In addition, Liu Luanhong also holds an additional 20.61% stake in the company through private Affiliated Companies and family trust.

QIA owns 19.9% of Bellshill.

As a matter of fact, Zhou Dafu began to carry out the reduction of RIFA international from Zheng Jia Chun.

Last March, Real Reward distributed approximately 13.81% of the shares of Li Fu to the Liu Luanhong family and Zhou Dafu in the form of special dividends.

Then, in October, the Zheng Jiachun family sold 115 million shares of rifle, 69 million of which were undertaken by Liu Luanhong and 1 billion 880 million of Hong Kong dollars by Zhou Dafu.

Plus the sale of QIA to the joint venture, Zhou Dafu realized a total of HK $4 billion 272 million.

As early as 2012, when Zheng Jiachun took over the family business, there was a subtle change in the cooperative relationship between the two big families of Zheng Liu.

Zheng's new world development suddenly terminated the tenancy of the Tsim Sha Tsui store in the Department of SOGO in the light of redevelopment. After 2 years, the SOGO Tsim Sha Tsui shop was officially closed in February this year, and is expected to be opened in November.

Zhou Dafu is not the only Hong Kong investor to withdraw from this field.

As early as March, Li Jiacheng sold a 24.9% stake in decades of PARKnSHOP supermarket to Singapore's sovereign wealth fund, Temasek, with a HK $44 billion stake.

Just last week, InterContinental Hong Kong in Tsim Sha Tsui's core business circle heard that the whole price was purchased at HK $8 billion.

"It may be only a matter of time before Zhou Dafu sells the remaining 16% stake in full.

The market is most concerned about whether or not the Liu Luanhong family will accept the offer. Investors like QIA and other three party financial investors may shake investors' confidence. It is hard to expect long-term funds to actually help SOGO's operation.

Guo Jiayao, chief strategist at Yin Sheng wealth management in China, said QIA shares are mainly valuing the current undervalued value, hoping to hold and capture the next rising cycle for a long time, and the valuation level is short of upward momentum in the short term.

The reporter inquired to Zhou Dafu group that the spokesman refused to comment positively on the basis of related investment and the business of the listed company.

After the closing of the market, the foreign exchange quoted the news that QIA and Liu's family sought to privatize Li Fu International after the paction, and thought the move could be greatly enhanced.

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Li Fu international spokesman immediately responded that, after QIA was 19.9%, Real Reward is still a major shareholder of the company. CEO Liu Luanhong has a long-term commitment to the company's business and denied the rumors of privatization.

Hongkong government statistics show that since the first fall in retail sales in 2 years in April this year, the total retail trade in Hongkong has been declining for 6 consecutive months. In 2008, the largest decline in 2008 (9.8%), and barely resumed growth until August.

But it is quite amazing that the flagship store of Tongluowan's SOGO Department Store in the first six months of the year has recorded an increase of 5% of the same store sales in the first two months of the year, and won the same trade. In May, the "thank week" promotion again broke the record, and the first day sales revenue exceeded 100 million Hong Kong dollars.

Huang Xiaoling (Linda Huang), director of consumer industry research at Macquarie Securities Hongkong / Mainland, told the twenty-first Century economic report that the sales dependence of SOGO on mainland customers was only 40%, much lower than the average level of 70% of other competitors, and most of them came from self run rather than tour groups, which was less sensitive to recent policy risks.

She said: "the new SOGO Tsim Sha Tsui new store opened in November, and the sales of the mainland's Jiu Guang Department Store stabilized, and the store sales and franchise fees of the department store will be on the new track.

As a long-term investor, QIA is aiming at the timing of the recent sharp drop in valuation and taking advantage of the low quality retail brand. "

Macquarie maintains the "win win" rating of riff international, with a target price of HK $20.5.

In addition to high-end retail, QIA's global investments include Agricultural Bank of China, CITIC stock, Credit Suisse Group, London Stock Exchange, Heathrow Airport holdings, Barclays and Volkswagen.