China’s state-owned financial asset management company Huarong Asset Management has agreed to purchase a minority interest in another state-owned investment company Citic Group for HKD$13.63bn ($1.75bn).
Under the terms of the share transfer agreement, Huarong will buy the shares representing 5.01% of Citic Group, held by its subsidiary Citic Polaris.
The total consideration implies a purchase price of HK$9.35 per share, which is a 29.3% premium to Citic’s last closing price of HK$7.23.
Huarong has created an Independent Board Committee to advise the independent shareholders about the share transfer agreement and the transactions.
It has appointed Hong Kong-based financial advisory firm Gram Capital as the Independent Financial Adviser to advise the Independent Board Committee and the shareholders.
In addition to the acquisition, the Chinese asset management company has announced the change of its name to China Citic Financial Asset Management.
The name change is subject to the final approval of the national market and the national financial supervision and administration departments.
Through the transaction, Huarong aims to improve its asset quality and financial conditions, optimise industrial layout, and gain capital in the long term.
China Huarong Asset Management is one of China’s four banks created after the 1997 Asian financial crisis, to buy bad loans from state-owned lenders, reported Reuters.
Citic held a 26.5% stake in Huarong, since the state-owned financial holding company backed the troubled asset manager through a $6.6bn government-arranged bailout, in 2021.
Huarong has been facing losses for years, with its real estate business facing a net loss of around $4bn for 2022, and a net loss of $676m for the six months ended 30 June 2023.
In view of mutual benefits, Huarong also purchased a 5% stake in Citic’s Hong Kong unit at a 30% premium to its last closing price, according to the publication.
