Citic Group sweetens bid to buy out financial unit
Tim LeeMaster and Wong Ka-chun
China Citic Group, a major mainland conglomerate, has bowed to shareholder pressure and raised the price it will pay to privatise Citic International Financial Holdings.
Citic Group said it would raise the cash offer of HK$2.16 a share for each CIFH share by 70 HK cents. The offer of one share in Hong Kong-listed China Citic Bank Corp, its mainland unit, for one CIFH share remained unchanged, it said.
The higher cash offer 'will further enhance the attractiveness of the offer premium ... and will engage the support of minority shareholders based on feedback to the proposal,' a CIFH statement said last night.
Sources earlier said Citic International's shareholders had been pushing for an additional HK$1 per share, but most would take 70 HK cents. A sweetened offer of less than 50 HK cents would not improve the chance of getting the approval, they said.
CIFH must receive approval from independent holders of 75 per cent of its shares and cannot garner more than 10 per cent of veto votes. The financial firm could not be reached for comment yesterday.
Shares in CIFH, which runs Citic Ka Wah Bank in Hong Kong, will resume trading today from yesterday's suspension. CIFH also said it would delay the release of details of the deal from Monday to September 30.
The privatisation is part of a larger deal that will see Spain's Banco Bilbao Vizcaya Argentaria double its stake in Citic Bank to 10 per cent and its stake in CIFH to 30 per cent.
Most troubling to investors is the HK$5.1 billion of bridging loans they say Citic is accounting for twice, both in CIFH's and Citic Bank's book value. Stripping out the loans, which China Citic values at 88 HK cents a share, the offer's value would fall to 0.99 times CIFH's book value from the announced 1.6 times.
Citic Group needs to pump at least 70 HK cents a share into the offer to take the price-book ratio to 1.6.
'They have been very proactive since this deal started and have done a good job talking to the street about where value lies,' said one investor.
'They know they have to do a much better job of marketing themselves to get the share price up.
'The bank's earnings are growing 100 times a year but it's trading at under two times book, which is a joke, and one of the reasons for that is they have a done a bad job of talking to the investment community.'
Its shares have risen 24.64 per cent this year to HK$6.07, against a 22.82 per cent drop in the Hang Seng Index.