Management buyout (“MBO”) offer at a price of HK$6.30 per share. Belleannounced on 28 April 2017 that the Company's management would buy theentire share capital from other shareholders at a price of HK$6.30 per share,which represents a premium of 19.5% to the closing price of HK$5.27 on thetrading day immediately before this announcement, and a premium of 21.5%to the average share price during the past 30 trading days prior to thisannouncement.
The total amount of cash required for the MBO is approximately HK$45.3billion. About 85.28% of the Company's total issued shares held by thedisinterested shareholders will be canceled in exchange for cash. The MBOwill be financed through 1) debt facilities amounting to HK$28.0 billionprovided by Bank of America, and 2) cash investment of HK$17.3 billion byHillhouse Capital and CDH Group. The MBO proposal will be determined atthe general meeting and the court meeting. The acting-in-concertshareholders control 40.46% of Belle's share capital, as at 28 April 2017.
Raise TP to HK$6.30 and recommend “Sell”. The valuation of Belle hasbeen under pressure in recent years, mainly due to challenging marketconditions as well as Belle's bad performance in its footwear business. Thebuyout price of HK$6.30 represents 13.4x/14.7x/14.9x FY17/FY18/FY19PER, respectively, and a 19.5% upside potential, which makes it quiteattractive. Therefore we believe it is very likely that the disinterestedshareholders will accept the buyout terms. Risk: the buyout proposal may notbe approved, which may result in a slump in the Company's stock price.