HONG KONG -- Hong Kong's Cheng family, which control's Asia's largest jewelry store chain and several shopping malls in the city, is bidding to take control of storied clothing retailer Giordano International.
Giordano, an early pioneer of casual fashion in Asia that helped inspire Uniqlo boss Tadashi Yanai, has atrophied since achieving peak profits of 826 million Hong Kong dollars ($105 million) in 2012.
While it held a grand opening for its first Egyptian store earlier this week, its network is down to around 2,100 shops and sales counters in 30 markets in Asia and the Middle East, compared with a previous high of 2,648 outlets.
In a joint announcement filed to the Hong Kong Stock Exchange on Thursday night, the Chengs and Giordano said the family's investment vehicle had offered to spend as much as HK$2.55 billion to buy all outstanding stock and share options beyond the Chengs' existing 24.6% leading stake.
The Chengs' offer of HK$1.88 a share is conditional on reaching 50% acceptance among Giordano shareholders. Patriarch Henry Cheng and his family indicated in the announcement that they would seek to preserve Giordano's market listing, which would require at least 25% of shares to remain in public hands.
The Chengs said they would "work together with the company's management to review the structure, operation and business of the group with a view to enhancing and strengthening its business by, amongst other matters, taking advantage of the extensive network and experience of the offeror's group companies and affiliates especially in the retail sector."
Aside from Chow Tai Fook Jewellery Group, which had 4,014 sales outlets as of March 31, the Chengs' property company, New World Development, operates 29 department stores in China as well as malls in both Hong Kong and the mainland.
Market investors have so far embraced the deal, pushing Giordano shares up 17% to HK$1.86 by late afternoon from Thursday's close.
But dismissive views toward the bid, which will be reviewed by a committee of independent Giordano board directors, also emerged quickly.
"The Cheng family's cheeky $1.88 bid for Giordano is far below fair value, an attempt to preclude a competitive bidding process by reaching 50% before the retail recovery," said David Webb, a local shareholder rights activist who holds a 5% stake in Giordano, in a tweet.
"Shareholders should reject," he added. "Management should invite competing offers. Let the action begin."
Analysts Arun George and David Blennerhassett, who both publish on the SmartKarma platform, respectively called the Chengs' offer "underwhelming" and "not at all compelling" compared with share premiums paid in other recent Hong Kong retail sector deals.
"This offer price won't be sufficient to get to 50%," said Quiddity Advisors' Blennerhasset, noting that Giordano's operations in emerging markets have been doing well. "Pricing should be in the low HK$2s at least."
The Chengs agreed last month to sell aircraft leasing unit Goshawk Aviation, whose ownership was split between Hong Kong-listed NWS Holdings and family holding company Chow Tai Fook Enterprises, to Japan's SMBC Aviation Capital for $1.57 billion.
Giordano, like many other retailers, has struggled with the impact of the COVID pandemic, recording a net loss attributable to shareholders of HK$112 million in 2020 as sales declined more than a third from a year before.
The company returned to a profit of HK$190 million last year as sales rebounded 8.3% to HK$3.38 billion. However, Peter Lau, Giordano's chairman and chief executive, said in March that the company would continue to close stores given its pessimistic medium-term outlook.
Giordano was founded in 1981 by Jimmy Lai, originally as a manufacturer. Lai, who came to Hong Kong from China's Guangdong Province when he was 12, was forced to sell the company due to his strong stance against the 1989 Tiananmen crackdown.
The proceeds helped fund Lai's splashy entry into the media business with Next Magazine and the Apple Daily newspaper.
Lai is now serving multiple sentences for involvement in unauthorized demonstrations in 2019 and still faces trial on national security law charges and other cases. Both Next and Apple have gone out of business, with the newspaper forced to close exactly one year ago under police pressure.