CITIC Group to List in HK by Reversing into CITIC Pacific

CITIC Group to List in HK by Reversing into CITIC Pacific

03-27 15:19 Caijing

China’s state-owned conglomerate CITIC Group is planning to list in Hong Kong by reversing into its CITIC Pacific unit.

China’s state-owned conglomerate CITIC Group is planning to list in Hong Kong by reversing into its CITIC Pacific unit.

CITIC Pacific signed a framework agreement with the group that the company is going to acquire all stake in CITIC Ltd., the group’s operating arm whose unaudited assets worth about CNY225billion (US$36.2 billion) at the end of the last year.

The deal will be paid with cash and new shares.

CITIC Pacific will issue an undisclosed number of shares at a price of HK$13.48 each, equivalent to a 6.5 percent premium to its Monday close of HK$12.66, subject to a definitive agreement.

Market value of CITIC Pacific was at HK$46billion based on the closing price prior to the announcement, compared with the about HK$280billion injections.

CITIC’s businesses in China range from real estate, to banking, securities, infrastructure, energy, natural resources and engineering, among others, and made a net profit of CNY34 billion yuan in 2013, according to a filing of CITIC Pacific.

The group plans to move its headquarter to Hong Kong following the deal, Bloomberg reported.

CITIC Pacific said that once the acquisition is complete it “will be a stronger company through a much enlarged shareholders’ equity, broader range of businesses and deeper managerial skills. These will enhance its competitiveness and ability to capture the economic growth opportunities in China.”

 

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CITIC Pacific (0267) plans to sell about HK$31.2 billion worth of shares to restore its public float after absorbing assets from parent CITIC Group.

The steel-to-property giant may approach sovereign wealth funds, China Investment Corp and Singapore’s Temasek Holdings, about buying into the offering.

CITIC Pacific shares soared to a record high of HK$16.54 yesterday before losing ground to close at HK$14.30, up 12.95 percent.

The blue-chip company said Wednesday it had agreed to buy CITIC Group’s assets with cash and new stock at a price of HK$13.48 per share, valuing the deal at up to HK$280.8 billion.

Investment houses are divided in their views.

Bank of America Merrill Lynch upgraded its target price for CITIC Pacific shares to HK$13 from HK$11.40, saying the deal will broaden the platform for the steel giant and help alleviate cash pressure brought about by the purchase of the magnetite mine in Western Australia.

Morgan Stanley expects limited upside as the stock was up 13 percent before Monday’s trading suspension.

UBS has put a HK$6.10 target, giving it a “sell” rating as the deal will raise the already high gearing ratio of CITIC Pacific.

CITIC Group is seen moving its headquarters to Hong Kong from Beijing after the transaction.

“Attracting companies to make Hong Kong their listing platform and setting up their headquarters [here] ..that is what we have been fighting for,” Acting Secretary for Financial Services and the Treasury Ceajer Chan Ka-keung said.

Hong Kong Exchanges and Clearing (0388) chief executive Charles Li Xiaojia said he welcomes the listing of CITIC Group in the SAR. But he refused to comment on whether it complies with current listing rules.

CITIC’s proposed move – essentially a back-door listing – means the bourse has lost the chance in the last 10 days to host three large mega initial public offerings – worth a total HK$240 billion. The other potential candidates were Alibaba and AS Watson.