Mainland port operator Cosco Pacific plans to sell its 20 per cent stake in Chong Hing Bank to its parent, Cosco Group, from whom it bought the shares 10 years ago, according to sources.
Trading in shares of Cosco Pacific and Cosco Holding was suspended yesterday pending an announcement of a connected transaction. Both companies are owned by Cosco Group, which will buy the Chong Hing Bank stake.
One analyst said the move was designed to boost the profits of Cosco Pacific, the world's third-largest container leasing company.
Cosco Pacific last year indicated its intention to spin off the bank, a non-core business. It bought the 87 million shares in two parts from Cosco Group in 1997 at HK$18.88 and HK$23.88 per share.
After the group restructuring in 2005 that positioned Cosco Pacific as a container terminal and leasing business, the company sought the best time to sell the non-core asset.
However, Chong Hing shares had fallen below the price Cosco Pacific paid for them, making it difficult for the company to offload the stake. Chong Hing's shares have rebounded to more than HK$18, above their book value of HK$15.68 per share, according to analysts.
Cosco Pacific's estimated gain from the sale would be HK$200 million based on yesterday's closing price of the bank's stock.