(Yicai Global) April 19 -- CDH Investments Fund Management Co. is in talks with the management at Belle International Holdings Ltd. [HKG:1880], China's largest women's shoe group, over a potential buyout, Bloomberg reported, citing people with knowledge of the matter.
The Shenzhen-based footwear seller was worth USD5.7 billion, less than half of its peak value, before trading of its shares was halted yesterday. The company cited a pending announcement related to Hong Kong's takeovers and mergers code as the reason for the suspension in an exchange filing.
Belle has been struggling. Its performance has declined for two years in a row, and it forecast that it will report profit for the fiscal year ended Feb. 28, 2017 down 15 to 25 percent.
Belle and CDH Investments have a history, an industry insider close to Belle International told Yicai Global.
Belle International introduced two fund companies under Morgan Stanley and CDH Investments to finance outlet operations and the integration of an original distributor system in 2005, before it went public. As private equity investors, the two groups contributed tens of millions of Hong Kong dollars to subscribe to a small part of Belle's redeemable stock.
The capital influx drove rapid development and two years later the shoe group was listed on the Hong Kong stock exchange.
"To introduce investors now may not be a bad thing for the management of Belle," the source told Yicai Global. "They can purchase it at a low price."
Perhaps the founder or management intends to dilute the shares to increase holdings by introducing a new investor, the source said. "The business is rather sluggish now, maybe some shareholders want to exit."
"The company lacks development direction and concrete actions, and there still lacks a clear idea about how to meet consumers' demand on cost-effective spending through making changes," said Belle Chied Executive Sheng Baijiao at last year's performance meeting. "One reason is that the group is fettered by vested interest, and any change may impact the short-term performance and call for a price. Since being listed, the major goal of the company is to achieve sustainable growth, and we do not dare to make decisions on fundamental transformations."
The share price of Belle before the stop on trading was HKD5.27 (USD0.68) per share.