Shuipan Lin, the founder and chief executive of Exceed Company, has put forward a non-binding proposal with several partners to acquire all of the outstanding shares they do not own in the company. The offer came just days after the Chinese company, which owns the Xidelong brand, put out unflattering numbers for the second quarter, with dizzying declines in sales and profit.
The offer by the group around Lin set a price of $1.72 per ordinary share in cash as part of a going private transaction for Exceed, which trades on the Nasdaq stock exchange. The offer amounted to 15 percent more than the closing price of $1.49 on the previous trading day, and 38 percent more than the average closing price in the previous 30 trading days. Nasdaq's records indicate that the share was launched in March 2007 at $7.25 and reached more than $10 in October 2009 but rapidly declined thereafter.
The company said it was forming a special committee to study the potential offer, which values the company at just about $57 million. However, the announcement hardly led to a run on the shares, which remained in a around $1.45, ending up at $1.48 yesterday. The offer involves Lin and his affiliates as well as HK Haima Group Ltd., Wisetech Holdings Ltd., Windtech Holdings Ltd. and Rich Wise International Investment Group Ltd.. These investors together held about 66.5 percent of Exceed's shares when they issued their potential offer.
Exceed pointed at weakening consumer demand in China to explain its paltry quarterly performance. But the company said it was still confident that its strategy would enable it to achieve single-digit sales increases per year in the long run, with particular potential in apparel.
The group's sales tumbled by 37.6 percent to RMB350.8 million (€43.4m-$57.4m) for the second quarter – although the company pointed out that it was also an increase of 16.5 percent compared with the first quarter. The figures include sales declines of 33.4 percent for apparel, 41.9 percent for footwear and 34.8 percent for accessories. For footwear, a drop of 35.4 percent in units was aggravated by a decline of 10.0 percent in average selling prices. The average price also decreased by 4.3 percent for apparel, while unit sales for this category were off by 30.4 percent.
For the first half of the year, sales collapsed by 55.2 percent to nearly RMB652 million (€80.6m-$106.6m), again with the steepest fall in footwear.
The number of Xidelong retail locations stood at 4,202 at the end of the quarter, a net decline of 494 units compared with the end of the first quarter. In the first half of the year the count was reduced by 707 doors compared with the end of 2012.
The group's gross margin dwindled by 1.5 percentage points to 27.3 percent for the quarter, still better than the 26.2 percent recorded for the first quarter. The cost of sales and distribution was reduced by smaller investments in advertising and promotion, particularly the group's contributions to store openings and refurbishing. Still, the group's operating income fell by 36.3 percent to RMB22.6 million (€2.8m-$3.7m).
Exceed's net profit landed at RMB15.6 million (€1.9m-$2.6m) for the quarter, down by 48.0 percent compared with the second quarter last year. The profit of RMB25.5 million (€3.2m-$4.2m) reported for the entire first half was a far cry from the RMB157.9 million (€19.5m-$25.8m) the company reaped for the same months the previous year.
A few days before the financial report, Exceed reinforced its board with two new members. It appointed a former government official, Pang Xiaozhong, the former director of the research and development department of the Institute of Sports Science, which operates under the General Administration of Sport, and Ding Dongdong, who was already executive senior vice-president at Exceed, to be in charge of design, research and development for footwear and apparel.
