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CITIC boosted by new acquisition

2014-03-28 10:32 Global Times Web Editor: qindexing

Shares in Hong Kong-listed CITIC Pacific Ltd surged by 12.95 percent Thursday after it announced Wednesday that it will acquire CITIC Ltd, the main unit of its parent company, State-owned CITIC Group Corp.

CITIC Pacific will use a combination of cash and issuance of new shares to acquire 100 percent of the shares in CITIC Ltd, according to a filing with the Hong Kong's stock exchange Wednesday.

The expected price of each new share will be HK$13.48 ($1.74), a 6.48 percent premium to CITIC Pacific's Monday closing price prior to the suspension of trading of its shares, according to the filing.

As a subsidiary of CITIC Group, CITIC Ltd had total equity worth about 225 billion yuan ($36.2 billion) at the end of 2013 and it made a profit of approximately 34 billion yuan last year, the filing said.

CITIC Group owns a 57.5 percent stake in CITIC Pacific, so the move in effect represents a backdoor listing for CITIC Group in Hong Kong, analysts said.

Both CITIC Group and the Hong Kong stock exchange will benefit from the backdoor listing, Feng Pengcheng, director of the China Research Center for Capital Management at the Beijing-based University of International Business and Economics, told the Global Times Thursday.

Being listed in Hong Kong, an international investment market, will increase CITIC Group's presence in the global market and facilitate its financing and further expansion, Feng said.

The move also shows the determination of China's central government to promote reform in State-owned enterprises, Liang Haiming, a Hong Kong-based finance analyst, told the Global Times Wednesday.

Feng noted that the Third Plenary Session of the 18th Communist Party of China Central Committee held in November 2013 had called for further development of a mixed-ownership economy and the involvement of private capital in State-owned enterprises.

The government is now encouraging enterprises to develop in global markets, Liang said, noting that more State-owned enterprises will go public in Hong Kong in the future.

"Chinese e-commerce company Alibaba Group's hesitation over choosing whether to go public in Hong Kong or the US has showed that stock exchanges face competition to win customers," Feng said.

Li Xiaojia, CEO of Hong Kong -Exchanges and Clearing Ltd, said he hoped the move by CITIC Group would proved to be successful, but he did not comment on the view that it was a backdoor -listing, news portal ifeng.com reported on Thursday.

CITIC Group's move also showed the central government's desire to support the economy of Hong Kong, according to Liang.

CITIC Group was established in 1979 by industrialist Rong Yiren, with the support of China's former leader Deng Xiaoping, according to its website.

The company has since developed into a large State-owned conglomerate, which covers a wide range of businesses, including commercial banking, insurance and asset management, as well as non-financial businesses such as real estate, energy and machinery.

CITIC Pacific is a diversified company that focuses mainly on steel, iron ore and property development in the Chinese mainland.

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