Li Ning Co shares fall 3.6% on Coolpoint plan
Updated: 2010-09-02 06:53
(HK Edition)
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Li Ning Co (LNC), a mainland-based sportswear maker set up by a former Olympic gymnast of the same name, fell to a three-month low of HK$24.15 in Hong Kong trading after it agreed to sell a stake to a company controlled by Li himself.
Coolpoint Energy Ltd will pay Li and his family new shares and convertible notes for the stake in the sportswear company, it said in a statement Wednesday, without giving terms of the proposed transaction. Hong Kong-based Coolpoint, an environmental technology provider, also said it will rename itself Viva China Holdings Ltd and provide sports promotions and event management services to LNC.
LNC dropped 3.6 percent to close at HK$24.15 in Hong Kong, the lowest since May 25, after slumping as much as 9 percent. Coolpoint shares jumped 18 percent to 92 Hong Kong cents, the highest since they started trading in April 2000.
Speculation about Li Ning's plans with Coolpoint has helped jack up the share price of Coolpoint by more than sixfold in the past five months. Li took control of Coolpoint after it invested HK$400 million in LNC in April.
"Li Ning will gain a new marketing vehicle and Coolpoint will be able to derive consistent revenue from the endorsement activities," said Jessica Hong, an analyst at Mirae Asset Securities (HK) Ltd. She has a "reduce" recommendation on Li Ning shares.
Li Ning has a market value of HK$26.2 billion. Coolpoint is worth HK$15.7 billion, according to data compiled by Bloomberg. The value of the transaction depends on the number of new shares and convertible notes Coolpoint issues.
Li, LNC chairman, won three gold medals in the 1984 Los Angeles Olympics and lit the flame at the 2008 Beijing Games.
The purchase may constitute a reverse takeover by Li and be deemed a new listing under Hong Kong stock exchange rules, according to Coolpoint's statement Wednesday. The company hasn't set the number of shares and the value of the convertible notes it will issue, according to the statement.
"Li Ning wants to extend its business to sports promotion through Coolpoint," said Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong.
"Coolpoint is just a shell company to house the new Viva China sports-promotion business."
In a separate transaction, Coolpoint will issue 590 million shares to buy Viva China Sports Holding Ltd, owner of commercial-management rights for China's national diving and artistic gymnastics teams, Coolpoint said.
Bloomberg News
(HK Edition 09/02/2010 page3)