POU Sheng International (Holdings) Ltd. has got a proposal from its parent Pou Chen Corp. to be taken private in a deal valuing the firm at HK$11 billion (US$1.4 billion), sending Hong Kong-listed shares in the sportswear retailer up 31 percent.

Pou Sheng shareholder Yue Yuen Industrial (Holdings) Ltd. has agreed to sell its 62.41 percent stake for HK$6.8 billion, or at a cancelation price of HK$2.03 per share, the Hong Kong-listed firm said in a stock exchange filing Sunday. Pou Chen owns almost half of Yue Yuen.

The offer, which values Pou Sheng at HK$11 billion and reflects a premium to the stock’s HK$1.54 Friday close, comes as traditional brick-and-mortar retailers continue to face mounting competition with online rivals luring buyers away.

Pou Sheng would need “significant investments” to transform its business and would have flexibility and more advantageous financing if it were to be taken private, according to the filing from the Hong Kong-listed firm.

The sporting goods industry “is experiencing unprecedented changes and challenges” from the rise of online shopping which has changed customers’ expectations, the filing added.

The boards of Pou Chen and Pou Sheng believe Pou Sheng’s listing status is ineffective in providing sufficient funds for the company’s business and growth, the filing says.

For Yue Yuen, the disposal will mean it will be able to focus on its core manufacturing business while improving financial clarity and transparency, UBS said in a research note, lifting its share price target for Yue Yuen to HK$38 from HK$35.

Yue Yuen said it would distribute a one-off special dividend to its shareholders on completion of the deal, sending its stocks up 15.6 percent to a record high of HK$37.10. (SD-Agencies)