Citic Group, China's biggest state-owned investment firm, raised its cash offer by 48 percent to HK$13.3 billion ($1.7 billion) to buy out minority shareholders in its Hong Kong unit Citic International Financial Holdings.
Citic Group will now offer one new share in affiliate China Citic Bank plus HK$2.16 in cash for every Citic International share the minority holders have, the unit said in a statement to Hong Kong's stock exchange. This values Citic International at HK$7.60 a share.
The higher offer takes into account the recent fall in China's stock market and is aimed at winning over minority shareholders into accepting its privatization proposal. Citic Group offered in June to pay Citic International holders one new Citic Bank share plus HK$1.46 in cash, valuing the Hong Kong company at HK$6.90 per share then. The value of this offer has since dropped after a 5 percent fall in Citic Bank's share price.
“Fund managers want more cash, rather than shares,” Kenny Tang, an associate director at Tung Tai Securities in Hong Kong, said before the announcement. Citic Bank's valuation is also unattractive and may face shrinking net interest margins in the current half-year, he said.
Citic Group was established in 1979 by former Chinese Vice Premier Rong Yiren to attract foreign capital, as the country began free-market reforms. It has 44 subsidiaries spanning broking and banking to oil exploration, and says the privatization is aimed at consolidating its financial operations.
Citic Bank Profit
Citic Bank, which is 62 percent owned by Citic Group, said last week profit rose 163 percent in the first half. The bank also said net interest margin, a measure of lending profitability, widened to 3.42 percent from 2.96 percent a year earlier.
Still, the company may not repeat this performance as growth may have peaked. Rival lenders including China Construction Bank and Bank of Communications this week cautioned their profit and loan growth would slow from the first-half.
Citic International last week reported a 4.6 percent decline in first-half profit to HK$1.44 billion ($184 million) as it wrote down a further HK$718 million in the value of structured investment vehicles.
Citic International, an investment holding company that owns a bank and two asset management firms in Hong Kong, also holds 15 percent of Citic Bank.
Lehman Brothers Holdings is advising Citic Group on the privatization.
Citic Group Profit
Citic Group, with 929 billion yuan of assets at the end of 2006, posted a profit of 6.1 billion yuan in 2006. Financial-related business accounted for 52 percent of the group's revenue and 40 percent of its profit. The group has four publicly-traded units on the mainland and six listed units in Hong Kong, according to its Web site.
After the privatization, Citic Group's stake in Citic International will rise to 70 percent, while that of Banco Bilbao Vizcaya Argentaria SA will double to almost 30 percent, according to the June statement.
BBVA, as Spain's second-biggest bank is also known, said June 3 it will spend 800 million euros ($1.24 billion) to double its stakes in Citic International and Citic Bank once the privatization is completed. The Spanish bank will own 10.1 percent of Citic Bank after the deal.
Will privatization minimize future losses and lead to a more integrated Citic Group?
posted by Charltonmedia.com | 11:52 PM
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