CP Group, Itochu to jointly invest $10 bn in China's Citic Group
Charoen Pokphand Group and its strategic partner, Japanese trading powerhouse Itochu Corp, plan to invest a whopping US$10 billion (Bt326 billion) in Citic Group, China's oldest and biggest conglomerate.
Itochu and CP Group said yesterday that they would contribute evenly to taking a joint stake of as much as 20 per cent, as both seek to raise their exposure to the world’s second-biggest economy even as its growth slows from the blistering pace of the past decade.
Citic has been broadening its investor base as part of Chinese President Xi Jinping’s reforms of state-owned enterprises. Citic completed a restructuring in August by injecting about $36 billion worth of assets into a Hong Kong-listed unit.
Last month, a person familiar with the matter said Citic Ltd was in early talks with companies, including Itochu and CP, about a large share placement.
CP Group in 2013 acquired discount retailer Siam Makro Plc for $6.6 billion, which was the biggest takeover announced in Asia that year, after purchasing a $9.4 billion stake in China’s Ping An Insurance (Group) Co.
The investment is by far the biggest made by a Japanese company in China on record, according to Thomson Reuters data, beating a $1 billion investment by Nissan Motor in Dongfeng Motor Corp in 2002.
While deals between Chinese and Japanese companies have become more frequent in recent years, Thomson Reuters data show that most have been small.
The 55 Japanese acquisitions in China last year were worth $772 million.
It is also the biggest ever by Itochu, and comes as it is trying to expand beyond resources, an area where it spent heavily during the global commodities boom through the early 2010s.
Before the Citic deal, Itochu’s biggest move was a 156.9 billion yen (Bt43.6 billion) purchase of two units of US vegetable and fruit producer Dole Foods in 2013.
The deal will take place in two stages, with Itochu and CP Group agreeing to buy nearly 2.5 billion shares in Citic for HK$34.4 billion in April and 3.3 billion shares for HK$45.9 billion in October.
Some analysts said the investment, which will likely require borrowing from banks, appeared risky for Itochu considering its market capitalisation was only slightly over
