Citic Pacific completes $36b asset deal

Combined group Citic Ltd will begin trading on the Hong Kong Stock Exchange on September 1 after receiving regulatory approval.

Citic Pacific has completed its massive Rmb227 billion ($36.8 billion) purchase of Citic Ltd from state-owned parent Citic Group after clearing all the necessary regulatory hurdles.

The new company will change its name to Citic Ltd, expected to take place by August 27, and will begin trading on the Hong Kong Stock Exchange on September 1.

As part of the deal, Citic Ltd attracted 27 strategic investors from China and overseas, who took about HK$53.27 billion worth of shares.  Public shareholding in the company will be about 22%.  

“As a unique China-focused conglomerate, we are now better positioned financially and strategically,” Chang Zhenming, chairman of Citic Ltd, said in a statement announcing the completion of the deal on Monday.

Citic Pacific, a Hong Kong-listed group specialising in iron ore mining, property development and specialty steels, will turn into China’s biggest conglomerate with interests in financial services, real estate and infrastructure, engineering contracting, resources and energy, and manufacturing.

Citic Ltd has a broad range of major assets, including a 67% stake in Citic Bank and a 20% stake in Citic Securities, which are both listed. It also has stakes in Citic Telecom, Citic Resources and Citic Heavy Industries.

“Citic Ltd is the ideal vehicle through which to invest in China, offering investors access to growth opportunities and businesses they could not otherwise tap,” Chang said in the statement.

The new entity will have combined revenues of HK$410 billion and assets of HK$5,322 billion – the largest among the conglomerates in China and exceeding Li Ka-shing-controlled Hutchison Whampoa.

Citic's deal is happening at a time when China's government is reining in its state-owned enterprises (SOEs) and pushing them to be more transparent and market-driven.

This will be put to the test as Citic Ltd will be headquartered in Hong Kong, bringing a greater degree of scrutiny at a time when investor protection and nervousness about mainland companies listing in the city is high on the agenda of investors and regulators. 

However, the upside is that the enlarged group will have greater access to international capital markets, strengthening its capital base.

The listing adds a touch of gravitas to the HKEx, which this year lost out to New York on the imminent IPO of Alibaba, which is expected to raise more than $20 billion. 

Citic Securities and CSCI were advisers to Citic Pacific.

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