Hillhouse, CDH-led Group’s $6.8 bn Leveraged Buyout of Shoe Retailer Belle

By Taslim Ahmed, Faye Huang, Wray Wang

In July 2017, Private Equity companies CDH and Hillhouse completed the leveraged buyout of China’s largest shoe retailer, Belle International for HK$53.1bn (US$6.8bn). It became the largest privatization deal on Hong Kong stock exchange.

About the Target: Belle International Holdings Ltd. (Belle)

Belle was founded in 1978 and is headquartered in Cheung Sha Wan, Hong Kong. It is an investment holding company that manufactures, distributes and retails shoes and footwear products. The company operates through two segments, Footwear Business, and Sportswear and Apparel Business. It offers footwear products under the company owned brands of Belle, Staccato, Joy & Peace, Millie’s, Jipi Japa, Mirabell, Tata, Teenmix, Senda, Basto, SKAP, :15MINS, Map by Belle, and Fato, among others.; and distributes footwear under the licensed brands of Bata, Caterpillar, Clarks, Fitflop, Hush Puppies, and Mephisto, among others.

The company also distributes sportswear under the licensed brands of Nike, Adidas, Puma, and Converse, among others.; and apparel under the licensed brands of Moussy, SLY, and REPLAY, among others. It operated 20,841 retail outlets, including 20,716 in Mainland China, and 125 in Hong Kong and Macau. In addition, the company engages in the manufacture and trade of apparel; operation of sports complex and e-commerce business; property holding activity; and provision of administration services.

About the Acquirers: Hillhouse Capital Group (Hillhouse) and CDH Investments

Hillhouse is a leading investment management firm founded in 2005. Hillhouse invests with a long-term time horizon and employs a fundamental, bottom-up approach. The company invests globally with a focus on Asia. Hillhouse manages capital for institutional clients such as university endowments, foundations, sovereign wealth funds, pensions and family offices. Tencent, JD.com, Baidu, and Midea are some of its portfolio companies and legacy investments. Hillhouse focuses on the consumer, TMT, industrials and healthcare sectors and invests in companies across all equity stages. The company has assets under management (AUM) of over $20 billion.

CDH Investments is a private equity and venture capital firm that was founded in 2002 and is based in Beijing, China. The company specializes in all stages of investments in the Fintech sector. The company also invests in virtually every sector, including the agricultural sector and real estate. The company’s investment focus is the Greater China. The firm typically invests in China consumer-related industries. Some of its portfolio companies include: Midea, Hengyi, and Shineway group. The company has AUM of over $20 billion.

About the Industry: Consumer Retail trends in China

Chinese consumers are more engaged in e-commerce activity than consumers in any other countries. According to China’s National Bureau of Statistics, Chinese consumers spent $1.14 trillion online in 2017, 32.2% higher than in 2016. China’s consumption market, therefore, is characterized by mobile-first consumer behavior, vibrant social commerce adoption and a widespread digital payments infrastructure. In addition, the competition between local and international brands are intense, and the internet giants compete to build broad digital ecosystems while start-ups trying to redefine customer experience.

Three big trends are shaping the future of retail in China. First, New retail normal. “New Retail”, a concept brought up by e-retail giant Alibaba, is to build omni-channel making the transition between online and offline channels as seamless and integrated as possible. While O2O focuses on marketing, omni-channel covers a wide spectrum of operational processes including marketing, merchandising, customer service and fulfillment.

The omni-channel strategy intends to improve operational efficiency, customer experiences and overall profitability. Second, technology driven innovation. As the application of big data penetrates industries, a data-driven retail revolution begins in china. Retailers are collecting data through many new methods such as real-time tracking systems and scenario modelling. The data can help companies to achieve “hyper customer-centricity” in order to target, segment, and personalise their interactions with customers. Third, a shift in the focus of consumption from material satisfaction to the experiences brought by the purchase behavior. Chinese millennials are seeking greater levels of interaction with brands and products. Many retail shops in China are transformed into experiential center to offer more novelty and excitement to customers.

The Deal Structure and Rationale

Bank of America Merrill Lynch acted as the buy-side advisor for the consortium. The deal values Belle at 6.3HKD per share, representing 19x P/E and a 20% premium on the day of the announcement. 52% of the transaction comes from debt financing. Belle international was subsequently delisted.

The rationale of Bell’s privatization was mainly due to the underperformance of traditional retail. The disruption in the retail space in China brought by E-Commerce giants like Alibaba and JD.com has jeopardized the competitive advantages offered by traditional stores such as Belle International. In 2016, Belle’s revenue decreased by 18% YoY and had to close down stores that it opened during business expansion.

Future Outlook

Belle’s delisting is part of a broader privatization trend among offline retailers, fueled by the gloomy industry outlook. In January 2017, Alibaba privatized a Chinese department store operator, Intime Group for $2.6 billion, a 40% premium over its last traded price.

Hillhouse and CDH wanted to re-brand Belle and focus on E-Commerce, and possibly exit through A-share listing in the future. Zhang Lei, the Chariman and CIO of Hillhouse, became Belle’s new Chairman. Hillhouse plans to apply 3D printing technology to footwear, and envisions customers coming into a physical store for initial fittings and then receiving personalized, customized service online.

“Companies marginalized by technology can be re-energized by jumping on the tech train to be more useful” Mr. Zhang said.

Authors: Taslim Ahmed, Faye Huang, Wray Wang

Editor Responsible: Carmelo Spallino


Regulatory Filing on Hong Kong Stock Exchange:


Public Announcement on Belle’s website:


Reuters News:


FT News:


SCMP News:


Nikkei News:


Report from PWC: “eCommerce in China-the future is already here”


BCG Publications:


Report from Deloitte: “China Retail Industry Development”


Jing Daily: