China's CITIC Pacific Ltd (0267.HK) said it had secured $5.1 billion to help fund the purchase of some $36 billion in assets from its state-owned parent company, as strategic investors lined up to give the landmark deal their blessing.
The deal, which is essentially the injection of CITIC Group Corp's CITIC.UL main operating business into the Hong Kong-listed company, is part of a wide-ranging reform of China's state-owned enterprises.
The fifteen strategic investors funding the deal include a group of Chinese state-backed entities purchasing about $4.1 billion worth of shares and overseas investors buying about $1 billion, the company said late on Wednesday.
China's National Social Security Fund will be the biggest investor, agreeing to buy HK$16.8 billion ($2.2 billion) of shares. Insurer AIA Group Ltd (1299.HK) is buying $300 million, while sovereign wealth funds Qatar Holding and Singapore's Temasek Holdings TEM.UL will contribute $200 million and $100 million respectively.
Japan's Tokio Marine Holdings (8766.T) and Mizuho Bank (8411.T) will also contribute $100 million each.
CITIC Pacific's independent financial advisor said the terms and conditions of the deal were "fair and reasonable" and its independent board panel recommended it to shareholders.
Assets being acquired include stakes in several large financial services businesses such as CITIC Bank (0998.HK)(601998.SS) and CITIC Securities (6030.HK)(600030.SS), as well as a holding in CITIC Heavy Industry (601608.SS) and others in real estate, natural resources and telecommunications.
Funding for the huge asset purchase will also include a stock issue worth 177.01 billion yuan ($28.4 billion) by CITIC Pacific to CITIC Group at a price of HK$13.48 per share, on top of the cash portion raised from the strategic investors.
The deal needs to be approved at a shareholders' meeting on June 3, and is expected to be completed by August 29. The company also plans to change its name to CITIC Ltd.
CITIC Pacific had initially planned to sell $8.1 billion worth of shares to strategic investors to comply with Hong Kong's requirement for a 25 percent minimum free float, but it was able to secure a waiver to the rule for a lower 15 percent threshold.
CITIC Pacific's shares were up 0.4 percent at HK$13.96 on Thursday, in line with the benchmark Hang Seng index .HSI. They have risen 15 percent since late March when the company unveiled plans to buy the assets.
CITIC Group, China's oldest and biggest financial conglomerate, was established in 1979 by Rong Yiren, one of the few industrialists to stay on in the mainland after the 1949 revolution. The company was set up with the support of former leader Deng Xiaoping, and has 11 stock market-listed entities.
The asset purchase will give a much-needed boost to CITIC Pacific after it miscalculated the huge cost of developing a mine in Western Australia.
($1 = 7.7519 Hong Kong Dollars) ($1 = 6.2289 Chinese Yuan)
(Additional reporting by Anne Marie Roantree and Denny Thomas; Editing by Edwina Gibbs)