HONG KONG - Chinese conglomerate Citic Group, whose businesses span property, resources and banking, plans to shift its vast assets into its Hong Kong-listed unit in a multi-billion-dollar deal that will help it tap overseas investment.
The country's largest state-run conglomerate will hand all its shares in Citic Limited - its operating company with unaudited assets worth about $36.2 billion at the end of last year - to Hong Kong unit Citic Pacific.
"These will enhance its competitiveness and ability to capture the economic growth opportunities in China,"Citic Pacific said in a filing with the Hong Kong Stock Exchange Wednesday.
"Citic Pacific will be a stronger company through a much enlarged shareholders' equity, broader range of businesses and deeper managerial skills."
"If the potential acquisition is completed, Citic Pacific's improved credit profile will give the company increased funding flexibility to finance its business," the firm said.
Shares in Citic Pacific soared as much as 30 percent on Thursday before easing back to end the day session 13 percent higher at HK$14.3 (S$2.33).
Citic Pacific said it had signed a framework agreement for the deal, which it will finance through cash and shares and which must still be approved by the Hong Kong stock exchange and shareholders.
The news comes as China's leaders embark on a reform programme of state-run enterprises that have opened them up to overseas investors.
The Communist Party promised in November to deepen economic reforms, including allowing private companies a bigger role in the economy and a requirement that state firms to pay larger dividends to the government - boosting competition.
"The deal is consistent with the theme of SOE (state-owned enterprise) reform, as one of the reform's purposes is to increase securitisation of national assets," a report published by investment bank Goldman Sachs said on Thursday.
"If successfully completed, it would turn (Citic Pacific) into the largest listed conglomerate in China with a broader range of businesses," the report, which was put together by a group of Hong Kong-based analysts, said.
Boost for Hong Kong exchange
In February, state-owned oil refiner Sinopec said it would introduce "social and private capital" in its plan to divest 30 percent of its retail oil business, according to a filing to the Hong Kong bourse.
Citic Pacific currently has interests in steel manufacturing, iron ore mining, and infrastructure and real estate in China and Hong Kong. However, it suffered blow in 2008 when it lost billions of dollars in
ill-fated Australian dollar hedging bets, which prompted major divestments, including a sale of its stake in Hong Kong flagship airline Cathay Pacific.
The deal will also be welcomed by Hong Kong's exchange after Chinese e-commerce giant Alibaba this month opted to list in New York, calling into question its ability to maintain its status as the key revenue-raising hub for mainland firms.
Citic Pacific chairman Chang Zhenming said in a statement posted on the company's website that Hong Kong had the "international connectivity" as well as "established legal framework" that had helped company grow.
"Hong Kong has been our home for 30 years...we are deeply committed to this market," he said.
The statement also said the transaction will give shareholders "direct exposure" to China's largest multi-industry conglomerate.
Wednesday's announcement also means Citic Group will no longer be holding a planned US$10 billion initial public offering in the city, which it had been considering for several years.
Citic Group, which ranked 172th last year in Forbe's 500 largest global corporation ranking, was one of the first overseas investment vehicles set up by Beijing as the nation opened to the world in 1979 under a liberalisation programme initiated by Deng Xiaoping.