To Acquire Parent Company’s Assets CITIC Pacific Raised $5.1 Billion

2014-05-15
Published : May-2014

Hong Kong based CITIC Pacific Ltd announced that it had secured $5.1 billion to help finance the acquisition of around $36 billion in assets from its parent company.

On Wednesday, the company announced that the fifteen strategic investors financing the deal include a group of Chinese state-backed entities buying shares worth around $4.1 billion and foreign investors purchasing around $1 billion worth of shares.

By agreeing to buy $2.2 billion shares, China’s National Social Security Fund will be the largest investor. AIA Group Ltd, Qatar Holding and Singapore’s Temasek Holding are purchasing $300 million, $200 million and $100 million shares respectively.

Mizuko Bank and Tokio Marine Holding of Japan will also be contributing $100 million each.

CITIC Pacific’s independent board panel recommended the deal to the shareholders after the company’s independent financial advisor conveyed that the terms and conditions of the deal were “fair and reasonable”.

Assets being acquired include stakes in financial services businesses like CITIC Securities, and CITIC Bank. It also includes holding in CITIC Heave Industry and others in natural resources and telecommunications.

A stock issue worth $28.4 billion will also be included in the funding for the massive asset purchase by CITIC Pacific to CITIC Group at $1.74 per share, in addition to the cash portion raised from the strategic investors.

The deal must be approved on 3rd June, 2014 at a shareholders’ meeting, and the deal is estimated to be closed by August 29th of this year.

In order to fulfill Hong Kong’s requirement for a 25% minimum free float, CITIC Pacific originally planned to sell shares worth $8.1 billion to strategic investors, but it was able to secure a waiver to the rule for a lower 15% threshold.

Last week CITIC Pacific’s shares were up by 0.4% at $1.8, aligned with the standard Hang Seng index (HSI). Since March the stocks have increased, when the company revealed plans to buy the assets.

After the miscalculation of the massive cost of developing a mine in Western Australia, the asset purchase will provide a much needed boost to CITIC Pacific.

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