On 7 January 2011, China Hi-Tech Group and Mr. Fong Sou Lam, the controlling shareholder, chairman and executive director of Fong’s Industries signed a sale and purchase agreement pursuant to which China Hi-Tech Group has agreed to acquire from Mr. Fong 37.7% of the issued share capital of Fong’s Industries Co. Ltd. at HK$5 per share on or before the long-stop date of 7 May 2011. At the close of the unconditional mandatory cash offer on 3 June 2011, China Hi-Tech Group has acquired approximately 61% shareholding in Fong’s Industries, a publicly listed company with 48 years’ history now becomes a subsidiary of China Hi-Tech Group.
China Hi-Tech Group is the world’s second largest textile machinery manufacturer, next after Oerlikon. As a leading enterprise in the textile machinery industry in the PRC, China Hi-Tech Group has developed capabilities and considerable strengths in technology and quality to manufacture and supply full sets of cotton and artificial fibres machinery. The acquisition of Fong’s Industries is in line with the current trend of the consolidation in the dyeing and finishing industry as well as China Hi-Tech’s strategy to continuously expand and strengthen its textile machinery manufacturing operations in the field of dyeing and finishing machinery.
In recent years, the dyeing and finishing machinery industry in the PRC is quite decentralized with the top ten enterprises accounting for 15.32% of the market share and Fong’s Industries and China Hi-Tech Group are the 1st and 2nd largest respectively. Hence the merger of Fong’s Industries into China Hi-Tech Group will substantially strengthen their competitive edge and secure a majority share within the industry as a whole.
Fong’s Industries Group was established by Mr. Fong Sou Lam in 1963. Since its establishment, it is always adhering to its philosophies of “Merger with Your Excellence”. Fong’s Industries considers loyal customers as its invaluable assets, thus placing great emphasis on customer service and Fong’s Industries has successfully built up its reputation as a leading supplier of various quality dyeing and finishing machines in the world. With textile dyeing and finishing machinery as its core business, Fong’s Industries Group also carry on two complementary business segments, Fong’s Steels and Tycon Alloy in stainless steel trading and stainless steel casting respectively. In 1990, Fong’s Industries was publicly listed in HKSE and it was the first publicly listed company in the field of textile dyeing and finishing machinery. Today, Fong’s Industries holds a dominant and important position in the global dyeing and finishing machinery industry.
As expressed by Mr. Zhang Jie, the acquisition is in line with China Hi-Tech Group’s corporate strategic goal and its needs for business development, China Hi-Tech will better utilize the resources that Fong’s Industries has already had in a more effective way to further strengthen its competitiveness in the field of textile dyeing and finishing machinery as well as the casting industry. It will also enhance its management efficiency and organizational capabilities to adapt to both the internal and external environments. In addition, incentive plans will be launched to motivate staff in the near future. The Fong’s Industries Group will strive to improving the qualities of its corporate human resources and carried out training programmes in a pragmatic manner. At the same time, China Hi-Tech has persistently held in high regard in the usage of capital market and technological innovation to achieve the sustainable development of the Fong’s Industries Group as well as strongly supported the achievement of strategies and business objectives of Fong’s Industries.
What’s more, the acquisition of Fong’s Industries has also provided a major strategic significance to the textile industry in China. It helps to achieve integration of high quality assets and to better enhance the development of SOE in China. In particular, the acquisition meets the national textile industry revitalization plan and strengthens the competitive edges of enterprises with leading position in the textile industry. Additionally, the acquisition further expands the Fong’s Industries Group’s business scale, enriches its product mix and consolidates its business and operation modes.
China Hi-Tech Group believes that the aggressive acquisition strategy around the world has fueled its rapid growth. Due to the global financial turmoil in 2008 as well as the current cyclical downturn of textile industry, the value of most enterprises has been under-estimated even for those renowned companies with advanced technology. Besides, the textile machinery industry in most of the developed countries has declined considerably. All the above factors will provide excellent opportunities for China Hi-Tech to make acquisition worldwide.
Taking Fong’s Industries as its first overseas acquisition, China Hi-Tech makes a far-reaching and significant move.
Following China Hi-Tech’s takeover, Mr. Fong Sou Lam intends to continue to hold a substantial stake of approximately 20% in Fong’s Industries. Mr. Fong believes that the introduction of China Hi-Tech as the major shareholder of Fong’s Industries will enable Fong’s Industries to further enhance its market position and brand effect by offering strong support to the company for its future development. As a leading enterprise in the textile machinery industry in the PRC and even around the world, China Hi-Tech makes every effort to enhance its global position in the industry. At the meantime, China Hi-Tech will continue the existing businesses of Fong’s Industries essentially as it is currently operating. Through this acquisition, China Hi-Tech could extract synergies in market distribution, resources and access technology that Fong’s Industries possesses so that to achieve sustainable business growth.
Background Information on Fong’s Industries Co. Ltd.
Fong’s Industries Co. Ltd. was established by Mr. Fong Sou Lam in 1963. During the 48 years, Fong’s Industries has emphasized on technology innovation and reinforced investment in the research and development of advanced products. The Fong’s Industries Group proactively established customer network by providing one-stop services with a comprehensive range and brands of textile dyeing and finishing machinery.
Since 1998, Fong’s Industries has been eager to seek for new business opportunities by expanding its business mode though strategic cooperation and acquisition. It currently runs five brands including FONG’S , THEN, Goller, Xorella and Monforts Fong’s , all are leading and renowned brand names in the industry.
The tighter environmental regulations call for technical upgrade to environmentally-friendly dyeing and finishing equipment with low power consumption and dyestuff emission. Meanwhile, Fong’s Industries established its own waste water treatment unit, Fong’s Water Technology (FWT), which provides one-stop water re-use solutions to dyeing factories.