Leading Chinese sportswear group Li Ning Co announced Wednesday that a 25 percent stake in the company will be sold to Viva China Holdings, a sports talent management and consultancy firm, which is also controlled by former Olympic champion Li Ning.
Li Ning said the move was aimed at transforming its business model.
Two shareholders of Li Ning Co, Victory Mind Assets and Dragon City Management (PTC), have agreed to sell their stakes to Viva for $175 million, the sportswear group said in an announcement via Hong Kong Exchanges and Clearing Wednesday.
Li Ning, who is the founder of Li Ning Co, and his family members are also the principal owners of Victory Mind Assets and Dragon City Management. The new acquisition will see the founder reducing his involvement in the sportswear group.
Together with his family members, Li Ning has a stake of around 70 percent in Viva, according to a report released by the company Wednesday.
"Li Ning will probably enter the sports-related real estate sector," Xiong Xiaokun, a researcher at CIC Industry Research Center, told the Global Times Wednesday.
One of Viva's major businesses is construction of a "sport community," which combines sports facilities and residential community development.
Li Ning Co saw its product inventory rise sharply last year to a total value of 1.13 billion yuan ($179 million), up by 40.57 percent from 2010. And its net profit slumped 65.2 percent year-on-year to 386 million yuan.
The sportswear group closed a total of 1,200 stores nationwide in the first half of this year, blaming low operating efficiency. However, despite this move, the company's net profit still slumped 84.5 percent year-on-year in the first half.
Some of Li Ning Co's top officials, including their chief brand officer, chief management officer and chief executive officer also left the company last year.
"It is not a wise choice for Li Ning to step away from his major business," He Wenyi, deputy director of Peking University Institute for Sport Science, told the Global Times Wednesday.
As the country's first and arguably best-known sportswear company, Li Ning Co, which was founded in 1990, had experienced nearly a decade of fast growth until a few years ago. However, "it has not maximized its advantages, such as the good reputation of Olympic champion Li Ning. It has become no different from other firms," He noted.
He said Li Ning's new move is just a commercial trick of "moving money from his right pocket to his left pocket," and will have a limited impact on his business.