TPG partner brought in to help turn around Li Ning

Li Ning, the company's founder and a former Olympic gymnast, has been installed as temporary CEO.

Li Ning's 2011 annual results, announced in March, were hugely disappointing, with profit falling 65.2% to RMB386 million ($60 million) from RMB1.1 billion a year earlier. Higher marketing costs and an impairment loss on a brand licensing business were blamed for the poor performance.

Three months later, the company also warned of a "substantial decline" in profit for 2012, saying that competition within the sporting goods industry had intensified, discount promoting efforts had further increased, and the pressure of inventory clearance remained strong.

Earlier in February, the company sold RMB750 million in convertible bonds - RMB561 million to TPG and the remainder to Government of Singapore Investment Corp. (GIC). If fully converted, TPG will take a 12% equity stake in Li Ning, with GIC holding 8%, up from 6% prior to the deal.

Kim, who joined TPG in 2006, also led a turnaround at women's shoe retailer Daphne. The private equity firm invested RMB550 million in 2009 and over the next two years sale rose 50% and the company's share price increased fivefold.

However, it is questionable whether TPG can repeat its Daphne success at Li Ning. Since the investment was announced, Li Ning's stock has dropped by more than 30% to close at HK$4.89 in Friday morning trading. Admitting that China's sportswear industry has suffered from over-expansion, Kim stressed that the turnaround would be a multi-year effort.

He added that TPG would be willing to increase its investment if necessary. "We will make that decision when the company needs capital," he said. "If it makes sense for the company and TPG, we'll be very happy to do that."

Apart from Li Ning, the PE firm also joined Partners Group and ARC China Holdings, to invest some $45 million in China Vogue Casualwear, a casual sportswear local company under the Sisulan brand, in 2010.

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