Itochu, Thailand’s Charoen Pokphand buy 20 per cent stake in Citic Limited
Deal reflects Beijing's efforts to encourage private ownership of state-owned firms
Japanese trading giant Itochu and Thailand's Charoen Pokphand Group (CP) are buying a 20 per cent stake in Citic, China's largest conglomerate, for HK$80.3 billion.
The deal, signed yesterday, is an example of Beijing's efforts to reform state-owned enterprises by diversifying their base of shareholders to include more private and overseas investors.
"Citic has strong government backing and access to funding, but lacked experience in overseas investment and was prone to paying too much for assets," said Christfund Securities research director Simon Lam Ka-hang. "Itochu and CP can provide expertise and share risks overseas."
Citic said it would use the proceeds to develop its businesses, invest in emerging opportunities in sectors well matched to its development and that of China, and as additional working capital for daily operations.
The state-owned conglomerate learned about overseas investment the hard way after seeing its US$10 billion iron ore mining project in Western Australia suffer major cost blowouts and construction delays.
It warned earlier that its 2014 profit would be lower due to an impairment of between US$1.4 billion and US$1.8 billion on its Australian Sino Iron mining project.
