I.T Group founder and CVC plans to delist from stock market

Fashion retailer I.T Group has proposed to privatize its business in a cash deal worth $168 million on Sunday, according to a Hong Kong Stock Exchange filing.

The deal, backed by private equity firm CVC Capital Partners, will see non-founder shares bought at $3 Hong Kong dollars apiece in cash, which is a 55 percent premium to the stock’s last closing price on Nov 30. Under the proposal, company founder Sham Kar Wai will retain 50.65 percent ownership, with CVC owning the remainder 49.35 percent after going private. The deal is still subject to shareholder approval.

In recent years, I.T Group has faced a similar fate as its Hong Kong-based peers such as Lane Crawford, Joyce, and Swank, struggling to keep up with retail’s digital transformation, which is dominated by Alibaba and JD.com in the mainland Chinese market.

“While the company has adopted online strategies, it has been unable to transform business operations sufficiently for online growth and related cost-savings measures to offset a decline in sales from retail outlets,” the filing read. “In the six-month period prior to August 31, 2020, turnover for the company declined by 31.9 percent, following an annual net loss for the financial year ending February 29 2020 of $745.8 million dollars.”

“The company foresees a long and challenging journey ahead until a full restoration of consumer confidence across most regions where the company operates…These factors require the company to re-strategize, undertake a deeper business transformation, and restructure in order to achieve long-term sustainable growth,” the filing said.

As with the wider industry, I.T has faced sharp declines in consumer spending across several key markets due to the outbreak of COVID-19, but it also earlier grappled with the impact of pro-democracy protests in Hong Kong. I.T’s outlets themselves also became targets in protests earlier this year because of a perceived pro-Beijing stance of its founder, Sham. Meanwhile, inbound tourism to Hong Kong has plunged this year, with arrivals during the third quarter declining by 99.7 percent from a year earlier.