Citic Pacific is buying a stake in a fibre-optic network from its chairman in preparation for a future mainland joint venture, analysts believe.
The company said on Tuesday it would pay chairman Larry Yung Chi-kin HK$319 million for a 20 per cent stake in China Express No 1 Backbone Network.
The deal will raise Citic Pacific's stake to 80 per cent from 60 per cent. Citic Pacific's mainland parent, Citic Beijing, owns the other 20 per cent.
Last month, Mr Yung said Citic Pacific and its parent were in negotiations to form a joint venture with mainland company China Satellite Communications (CSC) to develop Internet, satellite and fixed-line networks in the mainland. The 32,000-kilometre fibre-optic network project would be one of the proposed venture's main assets.
Citic Pacific said at the time it might buy more of the network from Mr Yung or its parent in order to maintain its interest at about 49 per cent after dilution.
'I guess the deal is a move to prepare for the eventual share dilution caused by CSC's investment,' said Keith Li, associate director of Daiwa Institute of Research.