Footwear maker Yue Yuen Industrial Holdings, which supplies global brands including Adidas and Nike, is set to receive HK$6.76 billion (US$860 million) from a proposal to privatise its retail arm.

A stock exchange filing yesterday says Yue Yuen plans to sell its 62.41 per cent stake in Chinese footwear retailer Pou Sheng International (Holdings) to its Taiwan-listed parent Pou Chen Corporation in a $10.9 billion privatisation plan. Pou Chen, in turn, owns a 49.99 per cent stake in Yue Yuen.

Pou Chen is offering Pou Sheng shareholders $2.03 a share, a 31.82 per cent premium over the share closing price on Friday.

Awaiting shareholder approval, the privatisation offer is expected to be completed by the end of May, after which Pou Sheng will cancel its listing status in Hong Kong.

Pou Chen says it intends to finance the offer from internal cash resources and loans.

Yue Yuen said it plans to return part of the $6.76 billion as a one-off special dividend to its shareholders, while the rest will be used for general working capital.

Pou Sheng was spun off from Yue Yuen and listed in Hong Kong in 2008. As trading in the shares was not active, the listing status did not provide enough funding for Pou Sheng’s business and growth, says the filing.

Turning Pou Sheng into a wholly owned subsidiary would give the retailer more flexibility to develop a new business model to better compete in China’s retail market, where it faces “unprecedented changes and challenges” from the growth of online shopping, which has changed customer expectations and boosted market competition..

Listed in Hong Kong since 1992, Yue Yuen has factories in China, Indonesia and Vietnam, producing 300 million pairs of shoes a year for Adidas, New Balance, Nike, Puma, Reebok and Timberland.