ACQUISITIONS
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Citic Pacific

Citic Pacific shareholders approve landmark deal

Go-ahead for 227 billion yuan takeover of parent Citic Group's assets marks the start of mainland move to reform state enterprises

PUBLISHED : Wednesday, 04 June, 2014, 5:08am
UPDATED : Wednesday, 04 June, 2014, 5:08am

Citic Pacific shareholders have voted almost unanimously for the company to buy nearly all the assets of parent firm Citic Group, cementing a landmark 227 billion yuan (HK$281 billion) deal that has been touted as the start of a new wave of reform of state-owned enterprises.

At an extraordinary general meeting held in Hong Kong yesterday, more than 99 per cent of the shareholders of Citic Pacific supported the jumbo acquisition and the sale of new shares, the company said in a statement to the stock exchange.

The deal will be the largest capital injection by a state-owned company into a Hong Kong-listed unit.

After the vote yesterday, Citic Pacific chairman Chang Zhenming, who also heads Citic Group - the country's largest investment firm - said it planned to complete the acquisition by the end of August.

Although most shareholders approved the deal, some minority investors, who would see the value of their holdings diminished by the issuance of new shares, expressed disappointment with the persistent weakness of Citic Pacific's share price.

Two investors, who bought their shares at about HK$40 each seven years ago, said nobody knew if the acquisition could help revive the company's share price.

Citic Pacific shares closed 0.15 per cent lower yesterday at HK$13.52. The stock hit a record high of HK$49.60 in September 2007, about a year before it announced US$2 billion in losses on hedging exposure to the Australian dollar.

Bankers said the high-profile acquisition of the parent company's assets had been handled secretly because of the sensitivity of the need for special approval from the top authorities in Beijing.

After the completion of the deal, Citic Pacific's main assets will consist of China Citic Bank, a medium-sized lender, and Citic Securities, the mainland's largest broker by market value.

Financial assets, such as a 62 per cent stake in Citic Bank and a 21 per cent holding in Citic Securities, accounted for 85 per cent of Citic Group's overall assets in 2012, according to a Morgan Stanley report.

Citic Pacific's name will be changed to Citic following the deal.

The voting had been expected to go through without a hitch after 15 institutional investors pledged to subscribe to HK$39.5 billion worth of shares.

The mainland's National Social Security Fund snapped up 42.5 per cent of the entire share issue, or HK$16.8 billion, while sovereign wealth funds from Qatar and Singapore were among the non-mainland buyers.

Citic Group, formerly known as China International Trust and Investment Corp, was the mainland's first overseas investment vehicle. It was set up in 1979 by former vice-president Rong Yiren, with special backing from the late paramount leader Deng Xiaoping, to help the mainland invest abroad in the early days of economic reform.

Citic Pacific was listed in Hong Kong in 1990 as a "window company" of the central government.