HONG KONG: Thailand’s Charoen Pokphand Group and Japan’s Itochu Corp and are reported to be in talks to jointly invest in Citic Ltd, the main listed unit of China's first state-owned investment corporation.
The companies are still waiting for regulatory approval from Chinese authorities, an informed source told Bloomberg News, asking not to be identified because the discussions are private.
The deal would be strategic in nature, the person said, declining to give a size. Citic said it was in preliminary talks with investors, without naming them.
Citic sold shares to 27 investors including CP Group earlier in the year when it bought $37 billion worth of assets from its parent. Some investors who did not participate "remain interested in cooperation", Citic said in a filing to the Hong Kong stock exchange on Friday. Shares of the company rose as 6.3% to the highest level in almost three months on the news.
The deal would extend cooperation between Japan's third-largest trading company and CP Group, which agreed in July to a $1.9 billion tie-up.
The transformation of Citic comes as Chinese President Xi Jinping advocates the most sweeping changes since Deng Xiaoping’s liberalisation in 1978, including allowing more private investment in state businesses.
The Wall Street Journal reported on Thursday that CP and Itochu would invest billions of dollars in Citic, citing unidentified people. Spokesmen for Itochu, CP Group and Citic declined to comment.
Itochu, Japan’s third-largest trading company, agreed to a business alliance with CP Group in July in an attempt to expand food supply in the world’s most populous region. The alliance may expand to chemicals, information technology and finance, as well as food businesses in the region, Itochu said at the time.
CP Group agreed to buy Itochu stock as part of the tie-up while the Japanese company said it will purchase a 25% stake in CP Group’s Hong Kong-listed unit.
CP is controlled by billionaire Dhanin Chearavanont and operates the country's largest integrated agribusiness group. It is also the parent of the mobile, internet and pay-TV group True Corp and runs CP-All, operator of some 8,000 7-Eleven convenience stores. It was the first officially aproved foreign investor in China and remains a major presence there.
Itochu has been seeking to increase its earnings outside of hard raw materials, such as the mining and trading of iron ore and coal, amid sliding commodity prices. It owns 40% of London-based apparel maker Paul Smith Group Holdings Ltd and last year bought Dole Food Co’s Asian fruit and vegetable business and global canned foods unit.
Citic Ltd’s asset injection gave the listed company stakes in Citic Securities Co and China Citic Bank Corp, adding financial services to its existing businesses in property and mining.
CP Group bought a 1% stake in Citic for HK$3.36 billion ($433 million) at the time, joining sovereign wealth funds and Chinese companies in buying shares of Citic as it raised funds to pay for the acquisition and restore its public float.