CITIC Group plans asset transfer to HK-listed unit amid SOE reform
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STATE-OWNED conglomerate CITIC Group, whose businesses span property, resources and banking, plans to shift its vast assets into its Hong Kong-listed unit in a multibillion-dollar deal that will help it tap overseas investment.
The country’s largest state-run conglomerate will hand all its shares in CITIC Ltd — its operating company with unaudited assets worth about US$36.2 billion at the end of last year — to Hong Kong unit CITIC Pacific.
“These will enhance its competitiveness and ability to capture the economic growth opportunities in China,” CITIC Pacific said in a filing with the Hong Kong stock exchange.
“CITIC Pacific will be a stronger company through a much enlarged shareholders’ equity, broader range of businesses and deeper managerial skills.”
“If the potential acquisition is completed, CITIC Pacific’s improved credit profile will give the company increased funding flexibility to finance its business,” the firm said.
CITIC Pacific said it had signed a framework agreement for the deal, which it will finance through cash and shares and which must still be approved by the Hong Kong stock exchange and shareholders.
The news comes as China’s leaders embark on a reform program of state-run enterprises that have opened them up to overseas investors.
China promised in November to deepen economic reforms, including allowing private companies a bigger role in the economy and a requirement for state firms to pay larger dividends to the government — boosting competition.
“The deal is consistent with the theme of SOE (state-owned enterprise) reform, as one of the reform’s purposes is to increase securitization of national assets,” a report published by investment bank Goldman Sachs said yesterday.
“If successfully completed, it would turn (CITIC Pacific) into the largest listed conglomerate in China with a broader range of businesses,” said the report, which was put together by a group of Hong Kong-based analysts.
In February, state-owned oil refiner Sinopec said it would introduce “social and private capital” in its plan to divest 30 percent of its retail oil business, according to a filing to the Hong Kong bourse.
CITIC Pacific currently has interests in steel manufacturing, iron ore mining, and infrastructure and real estate in China.
But it suffered a blow in 2008 when it lost billions of dollars in ill-fated Australian dollar hedging bets, which prompted major divestments, including a sale of its stake in Hong Kong flagship airline Cathay Pacific.
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