What's new
　　A consortium led by Hillhouse and CDH offered to buy BelleInternational in a privatization deal valuing the Company atabout US$6.8bn. The proposal will be effective with theapproval of >75% of disinterested shareholders voting inperson or by proxy at the Court Meeting （excl. the managementwho participate in the deal, who currently own ~85% of Belle）。
　　Comments
　　Privatization price: The offered price was HK$6.30/sh, a19.54% premium over Belle’s last closing price.
　　Post-deal ownership structure: Hillhouse and CDH wouldrespectively hold 56.81% and 12.06% of Belle after completion.
　　Belle’s management, including Mr. SHENG Fang and Mr. YU Wu,will own the remaining 31.1%.
　　Source of funds: The deal would be financed with （1） debtfacilities of HK$28bn provided by BofA and （2） an aggregate cashinvestment of HK$17.3bn from Hillhouse and CDH.
　　Reasons and benefits: The deal could facilitate Belle’sbusiness transformation given the challenging retail marketenvironment. According to Belle’s earnings alert, its net profitcould decline by 15~25% YoY for FY17 （ended Feb. 2017）。
　　Valuation and recommendation
　　Lower FY17 & FY18 EPS forecasts by 23% & 12% to Rmb0.29 &Rmb0.34. Introduce FY19 projection of Rmb0.37. These figuresare –16.8%, +16.5% and +10.4% YoY. Current price is 16.5xFY17e, 14.3x FY18e, 14.2x FY19e P/E. With the expertise indigitalization from Hillhouse & CDH, Belle could gain rich financialand operational resources, and new management motivated toimprove its business. Maintain HOLD. Lift TP by 28% toHK$6.30 （17x FY18e P/E）， 19.54% upside. We believe theproposal will be approved as a good profitmaking opportunity forcurrent shareholders.
　　Risks
　　Further slowdown of the footwear market.