Three years ago, Hillhouse Capital and CDH Investments completed the privatization and delisting of Belle International's Hong Kong shares at HK $45.3 billion, causing a sensation in the capital market. Topsports International Holdings Limited, a subsidiary of Hillhouse, went public in October, with a market capitalization of more than HK $57 billion on the day of the listing.

In the meantime, both institutions have made a lot of money. Just now, the cooperation between Hillhouse and Topsports International Holdings Limited has made new progress!

Topsports International Holdings Limited announced that its controlling shareholder Belle Sports plans to distribute its 78.4 per cent stake to the ultimate beneficial shareholders, of which Hillhouse Capital has a 44.5 per cent stake. This means that Hillhouse Capital will directly hold shares in Topsports International Holdings Limited. After the management becomes the largest shareholder, Topsports International Holdings Limited may be able to achieve organizational iteration and management structure optimization with the help of Hillhouse.

In fact, Hillhouse's investment in consumption is not limited to consumer sports. For example, there are Bulls Group, good products Shop, Jiang Xiaobai, Haidilao International Holding, China Resources Beer, Fuyao Glass Industry Group, "Starbucks Corp's ancestor" Piye Coffee (Peet's Coffee).

What is the logic of Hillhouse investment and consumption? In this regard, this paper also carried out some combing.

As of the end of December 2019, Hillhouse Capital managed more than $65 billion, making it one of the largest private equity funds in Asia.

Hillhouse direct shareholdingTopsports International Holdings Limited 44.5%Shares

On the evening of October 27th, Topsports International Holdings Limited announced that the company had received notification from its controlling shareholder Belle Sports Co., Ltd. (Belle Sports) that it would distribute all its shares in the company to its ultimate beneficial shareholders.

According to the announcement, Belle Sports currently holds 78.4% (distribution of shares) of the total issued share capital of Toubo Sports. Under the distribution, Belle Sports will distribute shares to its ultimate beneficial shareholders, namely Hillhouse HHBH Holdings Limited (Hillhouse HHBH), Wise Entrepreneurship Limited (Wise Entrepreneurship) and Superise Colorful Brands Limited (SCBL).

Upon completion of the distribution (currently expected to be around December 2020), about 44.5 per cent of the shares will be distributed to Hillhouse HHBH, about 46.4 per cent will be allocated to Wise Entrepreneurship, and the remaining 9.1 per cent will be distributed to SCBL.

The data show that Hillhouse HHBH is made up of Hillhouse Fund III, L.P. The company that ultimately controls, while Hillhouse Fund III, L.P. The only investment manager is Hillhouse Capital Management, Ltd., or Hillhouse Capital.

The announcement said that since the distribution does not involve changes in the ultimate beneficial ownership of the distribution of shares, the company believes that it will not adversely affect the company's business or affairs.

Industry insiders said that after the management has become the largest shareholder, Topsports International Holdings Limited may be able to achieve organizational iteration and management structure optimization with the help of Hillhouse.

滔Who is Bo?

When it comes to the Topsports International Holdings Limited movement, we should start with the privatization of Belle International, the "shoe king of the first generation", which sensed the Hong Kong stock market in 2017.

In April 2017, Belle International accepted an offer from acquirers, mainly Hillhouse Capital and CDH Investments, at HK $6.30 per share.The total price is HK $45.3 billionThe amount of Hong Kong stocks has been privatized and delisted.

The main reason for Belle International's privatization is to consolidate its long-term leading position in China's women's shoes market and avoid short-term interference and pressure from the stock market.

Zhang Lei, a partner at Hillhouse Capital, once said after privatizing Belle International that what the outside world is seeing now may be some of Belle's current problems, but from a Hillhouse point of viewBelle has a lot of treasure.

That's to the point.

In October 2019, Topsports International Holdings Limited, a subsidiary of Hillhouse Belle, went public in Hong Kong. Topsports International Holdings Limited International issued about 930 million shares at a price of HK $8.50 per share, raising a total of about HK $7.622 billion. Since then, Topsports International Holdings Limited International's share price has risen, with a market capitalization of HK $57.361 billion on the day of its listing. As of the press releaseTopsports International Holdings Limited's market capitalization has exceeded HK $65 billion.

Which also meansThe market capitalization of Topsports International Holdings Limited International has exceeded the price of the parent company Belle International when it was privatized. This also makes Hillhouse Capital and CDH Investments gain a lot.

In additionBelleIs also interpreted asHillhouse「Dumbbell theory」A classic practice.

A decline in half-year profits11%

In terms of business, Topsports International Holdings Limited Sports is the sports retail segment of Belle International and a key strategic partner for nearly 20 of the world's leading sports brands in China. These partners include Nike Inc, Adidas, Puma, Converse, Timberland and other sportswear brands, including Nike Inc for 20 years and Adidas for 15 years.

Since 2010, Topsports International Holdings Limited campaign began to explore the operation mode of multi-brand collection stores, successively opened TOPSPORTS Sports City, TOPSPORTS multi-product stores, TOPSNEAKER trend collection stores, etc., with more than 8300 direct stores and 35000 employees.

Recently, the company announced interim results for the six months to the end of August this year, with revenue of 15.77 billion yuan (RMB, the same below), down 7.01% year-on-year; gross profit of 6.566 billion yuan decreased by 11.39%. Net profit of 1.309 billion yuan fell 11% year-on-year, with basic and diluted earnings per share of 21.11 cents, with an interim dividend of 12 cents per share, together with special interest of 40 cents, totaling 52 cents.

As for the decline in performance, Topsports International Holdings Limited explained: the decline in company revenue is mainly affected by novel coronavirus's impact on overall sales and retail.

In addition, Topsports International Holdings Limited's profits in recent years are relatively insipid.

Photo: Topsports International Holdings Limited's revenue in the past three years

Photo: market capitalization ranking of Hong Kong sports companies

滔Can we "counterattack" with the help of Hillhouse?

Objectively, Topsports International Holdings Limited campaign's current performance is relatively mediocre, after Hillhouse has more say in it, can the company achieve a "counterattack"?

In fact, the Topsports International Holdings Limited movement has always been regarded as a typical example of Hillhouse's scientific and technological empowerment in the digital transformation.

According to the data, in 2018, Hillhouse Capital installed an intelligent store system for a store of Topsports International Holdings Limited Movement. during the observation period, the store found that female customers accounted for 50% of the total number of people entering the store, but the revenue contribution was only 33%. And the system suggests that 70% of customers have never visited the shopping area at the back of the store.

The data show that the conversion rate of female customers is low, and the back of the store is not effectively utilized. As a result, the store manager readjusted the layout of the store, increased the display of women's shoes and clothing, displayed more warm color products, and adjusted the movement and flow of customers to improve the visibility of the rear shopping area. A month later, monthly sales in the back shopping area of the store increased by 80%, and store-wide sales increased by 17%.

For Topsports International Holdings Limited's case, to sum up with Hillhouse's own words is: data is the means of production, there is a process to operate, there is an algorithm to sublimate. Data, algorithms and processes should form positive cycles that promote each other and generate value to the business.

The thinking of Hillhouse Investment and consumption

People's understanding of Hillhouse, the first reaction or more is his investment in the pharmaceutical sector, but in fact, in addition to Belle and Topsports International Holdings Limited movement, Hillhouse also has a lot of layout in the consumer sector.

For example, Bull Group, good products shop, China Resources Beer, Fuyao Glass Industry Group, not too much to talk about here.

Photo: from Noah Research

From the perspective of Hillhouse investment, summing up, it pays special attention to the following factors:

First, cash flow.

For example, on Belle's privatization, Zhang Lei once said, "No failed enterprise can have billions of yuan of cash flow every year." Moreover, Belle International is one of the 50 constituent stocks in Hong Kong's Hang Seng Index and is the first blue chip of a mainland company in Hong Kong. "

Second, channel operation and control.

Hillhouse once invested in Fuyao Glass Industry Group. Automotive glass is indistinguishable consumer goods, but Fuyao Glass Industry Group also made a strong premium brand, occupying a say in the channel.

In addition, the Bulls Group, which is just listed on the market, also has this advantage. Zhang Lei once said that the reason why the bull can establish a strong channel advantage is that it introduces the management experience and model of fast consumer goods into the field of civil electrical engineering, compared with its peers.It has very strong channel operation and control ability.At the same time, there is a very strong craftsman spirit, with the "conscience enterprise" reputation to become the first in the industry, thus has a monopoly position in the market.

Third, product quality.

In 2017, for example, Hillhouse introduced Peet's Coffee, the ancestor of Starbucks Corp, to China, and the first flagship store opened on Donghu Road in Shanghai. As for the introduction of the coffee, Zhang Lei once said, "as the consumer market is changing too fast, when communicating with operators, we are more concerned with how to improve the quality, taste and service requirements of coffee than how to pursue speed, scale and profitability. A good brand should do it slowly. "