Deal Gives WM Option for New Li & Fung entity

-- Home Textiles Today, 2/8/2010 12:00:00 AM

Hong Kong —

The Li & Fung souring deal with Wal-Mart Inc. gives the retailer the option to take ownership of WSG – the new operation that the trading company is establishing to provide global sourcing services for the WM account.

As part of the arrangement, Wal-Mart will have the right to require Li & Fung to transfer 100% of WSG’s shares to the retailer any time after Jan. 1, 2016, according to an announcement made by Li & Fung Ltd. today in Hong Kong.

Wal-Mart would not be required to pay a premium for the shares, and is not obliged to option them.

If under the rules of The Stock Exchange of Hong Kong, Wal-Mart’s options by that time require approval by shareholders, and if those shareholders failed to approve the transfer, Li & Fung would be obligated to pay the retailer a break fee. That few would be either $86 million US or 10% of WSG’s excise price, whichever is lower.