Citic joins BBVA to privatise financial arm in HK$12b deal
In keeping with a deal to let Banco Bilbao Vizcaya Argentaria (BBVA) double its stake in both Citic International Financial Holdings and China Citic Bank Corp, Citic Group will join hands with the Spanish bank to privatise Citic's Hong Kong-listed investment holdings arm in a share-cum-cash transaction valued at about HK$12 billion.
Shareholders of Citic International will receive one China Citic Bank H share and cash of HK$1.46 for every share they hold.
Citic Group and Banco Bilbao will co-finance the cash payout in equal amounts.
Citic Group holds 55.16 per cent of Citic International while Banco Bilbao owns 14.52 per cent.
Citic International, in turn, holds a 15 per cent stake in China Citic Bank and 100 per cent of Citic Ka Wah Bank, as well as some other Hong Kong financial assets.
The total payment could be as much as 1.78 billion Citic Bank shares and HK$2.6 billion in cash if the rest of the shareholders and option holders accepted the offer.
The offer price is equivalent to HK$6.90 a share based on Citic Bank's closing price of HK$5.44 on June 2, the day before Banco Bilbao announced its plan to raise its stakes, or 1.6 times Citic International's book value, bringing the total deal price to HK$12.3 billion.
But the offer price could drop to HK$6.41 a share based on Citic Bank's closing price of HK$4.95 yesterday, bringing down the total value to HK$11.42 billion.
Analysts said that the offer with a large portion in swapped shares was not attractive, particularly to investors who did not want shares of Citic Bank.
'The offer price is on the low side and may have to be adjusted upwards to push the deal through,' said Ivan Li, an analyst at Kim Eng Securities.
Even the premium of 21 per cent to Citic International's closing price of HK$5.70 on June 2 would be below market expectations. At the two stocks' respective close yesterday, the premium would be even less - at about 4 per cent.
'The price is reasonable and attractive,' said Chang Zhenming, the vice-chairman and president of Citic Group.
Mr Chang said Citic International's shares, excluding its stake in Citic Bank, had been undervalued since the latter's listing here last year.
He added that privatising Citic International could help unlock value for shareholders and allow the group to consolidate both commercial banking operations run by Citic International and Citic Bank.
'We want to unify the platform and also the brands,' he said.
After the privatisation, Citic International would be folded into Citic Bank to evoke the best synergies.
However, Citic International would not take over Banco Bilbao's Asian assets as agreed earlier.
Banco Bilbao announced on June 3 that it would double its stake in Citic International and Citic Bank for Euro800 million (HK$9.68 billion) on the pre-condition that Citic International would be privatised.
The Spanish lender said yesterday Euro600 million would go to capital investment and Euro200 million to support Citic International's financial needs.
After the privatisation, Citic Group will own 70.33 per cent of Citic International through its subsidiary, Gloryshare Investment, up from 55.16 per cent, and continue to hold 62.33 per cent of Citic Bank.
Banco Bilbao's stake in Citic International will rise to 29.67 per cent and in Citic Bank, to 10.07 per cent from 4.83 per cent.
Spanish connection
The deal will consolidate the group's commercial banking operations
After the privatisation, BBVA will lift its stake in Citic International to: 29.67%
