HONG KONG -- Li & Fung, the world's largest sourcing company, has teamed up with Chinese e-commerce giant JD.com as it moves to bring its global supply chain business more into the digital era.
The 114-year-old family business said on Friday that it had received an investment of $100 million from JD.com through an issuance of new shares at 1.25 Hong Kong dollars each. The investment will give JD.com a stake of about 6.7% in Li & Fung, according to Nikkei's calculation. The group's founding family will retain the control of the company, with 60% of the voting shares.
The new partnership is part of the digital transformation strategy led by Li & Fung's fourth-generation leader and group CEO Spencer Fung. He envisions a digital platform that connects customers and vendors, while delving more into data analysis, online order tracking, financing and virtual design.
The rise of e-commerce and wider adoption of technology is increasingly eroding the role of retail trade intermediaries such as Li & Fung. The coronavirus pandemic and trade tensions between China and the U.S. have compounded the problems facing the group.
This year, the Fung family took the company private as part of a deal with Singapore logistics company GLP Group, which paid HK$7.2 billion for a 67.67% stake in Li & Fung. The deal came after Li & Fung lost 95% of its market value from its peak in 2011.
The partnership with JD.com and GLP Group will be "instrumental" in further strengthening the group after privatization, Feng said in a statement on Friday.
JD.com is China's second-largest e-commerce platform after Alibaba Group Holding, and made its secondary listing on the Hong Kong Stock Exchange a month after Li & Fung's delisting.
Unlike rival Alibaba, which manages online marketplaces, JD.com also operates its own supply chain and logistics network. The mainland company has embarked on a plan to transform itself into a leading supply chain-based technology and service provider, and Li & Fung's expertise in international trade and private label can help it achieve this goal.
JD.com also highlighted the challenging business environment, saying: "The JD-Li & Fung partnership is especially salient in today's business environment, under which the global supply chain is undergoing restructuring with the impact of the COVID-19 pandemic."