Qatar sovereign fund in HK$4.7b stake deal with SOGO owner

Updated: 2014-10-21 07:07

By Celia Chen in Hong Kong(HK Edition)

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A unit of Qatar Investment Authority (QIA) has agreed to acquire a 19.9-percent stake, or 324 million shares, in Lifestyle International Ltd's dominant shareholder, Real Reward Ltd, for HK$4.78 billion ($616 million).

Qatar sovereign fund in HK$4.7b stake deal with SOGO owner

The deal caused Lifestyle's share price to slump by as much as 6 percent at the Hong Kong stock market's opening bell on Monday. The company's share price remained weak for much of the day's trading session, but rallied to close up 1.37 percent at HK$14.80 when Bloomberg quoted a source as saying that a full takeover of Lifestyle is not imminent.

Lifestyle operates the SOGO Department Store in Hong Kong's bustling shopping district of Causeway Bay. Its controlling shareholder, Real Reward, which is co-owned equally by Lifestyle's chief executive officer Thomas Lau Luen-hung and Chow Tai Fook Jewellry Group Ltd, has agreed to sell the stake at HK$14.75 per share - a 1-percent premium to Lifestyle's last traded price of HK$14.60.

"This strategic partnership demonstrates our business strategy and potential for growth. We will work closely together with Qatar to leverage on each other's business strengths and network to further grow our business," Lau said.

William Lo, portfolio manager at Ample Capital Ltd, told China Daily that most investors believe the transaction involves Lifestyle's willingness to change its shareholder base. "Chow Tai Fook, as one of its controlling shareholders, has been reducing its stake in Lifestyle. There's a need for Lifestyle to change its shareholder base because of conflicts. Qatar's sovereign fund is not a bad choice for Lifestyle as it has adequate liquidity," said Lo.

Qatar sovereign fund in HK$4.7b stake deal with SOGO owner

Castor Pang, head of research at Core Pacific, shares the same view, saying that the "worsening relationship between Chow Tai Fook and Lifestyle is a big driver for the transaction".

Impacted by the deal, Lifestyle's share price slumped by up to 6 percent to HK$13.70 at one stage in morning trading. "Lifestyle's share price always goes down because the purchasing desire of individual visitors from the mainland has been dented and I couldn't see any synergism between the buyer and Lifestyle. Thus, I think it will be difficult for its share price to go up in the short term," said Pang.

Deutsche Bank said the Qatar deal will not affect Lifestyle's operations, and maintains the company's "buy" rating and share target price of HK$21.0.

The stake purchaser, Bellshill Investment Co, is a wholly-owned subsidiary of Qatar Holding. The Qatar fund acquired London's Harrods Group in 2010 for 1.5 billion pounds. It also owns a 12.6-percent stake in Tiffany & Co. "I think Qatar's experience in running Harrods is expected to help SOGO's operations," said Lo.

(HK Edition 10/21/2014 page9)