BANGKOK/TOKYO — Itochu Corp and Thai agribusiness Charoen Pokphand Group will invest $10.4 billion (340.17 billion baht) in China’s Citic Ltd, the listed unit of China’s state-owned investment corporation.
Citic Tower, which houses the corporate headquarters of Citic Pacific Ltd, part of Citic Ltd, stands in the Admiralty district of Hong Kong on March 27, 2014. (Bloomberg photo)
The two companies will jointly acquire a 10% stake in Citic from its parent for HK$34.4 billion ($4.4 billion), according to a Hong Kong exchange filing. They will also purchase HK$45.9 billion of convertible preferred stock from Citic, which if converted would boost their stake to 20.6%.
The agreement comes as China’s president, Xi Jinping, advocates the most sweeping changes that Asia’s biggest economy has seen in a generation, including allowing more private ownership of state-controlled assets. Citic sold shares to 27 investors including Itochu and CP Group last year as it bought $37 billion of assets from its parent.
For Itochu, Japan’s third-largest general trader whose investments include fashion branded clothes, food, logistics and mining, the deal should ease access to a range of Chinese markets while deepening its alliance with the Thai group. CP and Itochu agreed to a $1.9-billion share swap in July.
The Thai group is controlled by billionaire Dhanin Chearavanont, who together with his brothers turned a family business into the nation’s largest agricultural group, making animal feed and operating farms that produce piglets, broiler chicks, shrimp and fish.
Chinese roots
Mr Dhanin, whose family roots are from southern China, says he’s the first major foreign investor in the communist nation since Deng Xiaoping’s liberalisation in 1978. A unit of CP, Chia Tai Co, started business in Shenzhen, the industrial city neighbouring Hong Kong, in 1979 and has the registration number “001,” according to CP Group’s website.
Itochu, which owns 40% of London-based apparel maker Paul Smith Group Holdings Ltd and bought Dole Food Co’s Asian fruit and vegetable business and global canned foods unit in 2013, has been the most active investor in China of Japan’s major trade houses, announcing the nation as one of its major strategic expansion areas in 2011.
Itochu’s former chief executive officer Uichiro Niwa was appointed as Japan’s ambassador to China in 2010.