CRE seeks bank stake worth $1b from Lippo
Red chip China Resources Enterprise has confirmed it is in talks with Lippo China Resources to buy Lippo's indirect 30.3 per cent stake in HKCB Bank Holding, which could bring its entire interest to 60.6 per cent.
Analysts estimated the deal would cost China Resources more than $1 billion, or about half the price it paid for its stake a year ago.
The potential purchase was widely expected after China Resources took the stake in HKCB Bank Holding through an asset swap with Lippo for more than $2 billion last June.
The deal would aid Lippo Group controlling shareholders, the Indonesia-based Riady family, at a difficult time.
HKCB Bank Holding controls the entire stake in small-sized Hongkong Chinese Bank, and interests in merchant bank and brokerage Lippo Asia and insurance firms.
At the request of the stock exchange, Lippo, Lippo China Resources and HKCB Bank Holding said in a statement that they had noted the recent turnover and share price increases of Lippo China Resources and HKCB Bank Holding.
They said they were in 'serious discussions' to sell Lippo China Resources' HKCB Bank Holding stake, which would require the buyer to make a mandatory offer for all remaining shares in HKCB Bank Holding.
China Resources said no binding agreement had been reached yet.
China Resources' share price rose 15 cents to $8.70 yesterday, Lippo China Resources added five cents to 58 cents, Lippo edged up 23 cents to $2 and HKCB Bank Holding climbed 25 cents to $3.075.
Analysts expected China Resources to use a 'club loan' of about US$150 million it was raising to help fund the transaction if it went ahead.
The company, which has about $2.4 billion in cash, has said it will use the money to make some big acquisitions and reduce its reliance on property by diversifying its business.
Analysts said the news was neutral to China Resources in the short term but might bring long-term benefits.
ABN Amro Asia analyst Eddie Lau Kwok-lap said the purchase might only bring a 1 per cent increase from $1.58 billion to $1.6 billion in net profit for China Resources this year.
'The long-term success of the investment will depend on [China Resources'] ability to run the business,' he said.