China Huarong takes 5.8% stake in toll road operator

(Reuters) – State-owned China Huarong Asset Management said it plans to buy a 5.8% stake in China Merchants Expressway Network & Technology for 3.01 billion yuan ($417.4 million).

The deal is expected to bring stable earnings to Huarong and optimise its asset allocation, the distressed debt manager said in a filing to the Hong Kong stock exchange on Monday.

Huarong is buying the China Merchants Expressway stake from Zhongxin No.1, a fund linked to the state asset regulating authority in the southwestern Chinese municipality of Chongqing, according to the filing.

Huarong purchased the stake at 8.4 yuan per share, or 90.71% of the 9.26 yuan closing price on the last trading day before the deal was signed, according to the filing.

The deal would also help “revitalize the existing assets of local state-owned enterprises,” Huarong said, without elaborating.

China Merchants Expressway, which runs toll road and transport technology businesses, is controlled by the state-owned China Merchants Group.

The deal is pending approval by Chinese regulatory bodies, Huarong said.

Huarong said last week it has agreed to buy a 5.01% stake in CITIC Ltd for HK$13.63 billion ($1.75 billion) from Chinese finance ministry-controlled CITIC Group, which also holds a 26.5% stake in Huarong.

Huarong also said it plans to change its name to China CITIC Financial Asset Management Co Ltd, in a bid to leverage the brand value of CITIC Group.

China Merchants Expressway reported a net profit of 5.25 billion yuan in 2022, compared with 5.54 billion yuan in 2021, Huarong’s filing showed.

(This story has been corrected to show that Huarong announced a plan to buy stake in CITIC Ltd last week, not last month, in paragraph 5)

(Reporting by Roxanne Liu and Kane Wu; Editing by Susan Fenton and Louise Heavens)