Shareholders at CITIC International Financial Holdings (CIFH) have approved a privatization plan for the company proposed by its parent, CITIC Group, a company executive said yesterday.

CIFH had its shares suspended from trading in Hong Kong yesterday morning pending the results of legal and shareholder meetings, during which more than 99 percent of participants voted their approval for the plan.

CITIC Group has offered one H-share of China CITIC Bank and HK$2.16 in cash for every CIFH share tendered. The transaction will be completed on Nov 15, according to the company.

Shares in CIFH will be de-listed from the Hong Kong stock exchange on Nov 5.

"Shareholder approval paves the way for privatization and sets a good foundation for the group's future development," said Dou Jianzhong, chief executive officer of CIFH. "We hope to complete the privatization as soon as possible, but it's a time-consuming process."

He told reporters at a press briefing that the privatization will show big progress by the middle of next year.

After the privatization, CITIC Group's stake in CITIC International will rise to 70 percent, while that of Banco Bilbao Vizcaya Argentaria SA (BBVA) will double to almost 30 percent.

CITIC Bank said earlier this week that its board of directors had approved BBVA's plan of raising its stake in the Beijing-based lender to 10.07 percent from the current 4.83 percent.

BBVA, Spain's second-largest bank, said in June that it will spend 800 million euros to increase its stake in CITIC Group.

Dou said CITIC Group, China's biggest State-owned investment company, has no direct exposure to Lehman Brothers' financial products, but its subsidiary, CITIC Ka Wah Bank, has sold minibonds issued by Lehman.

The group has designated Morgan Stanley to advise on the privatization of CIFH, replacing its former financial adviser Lehman Brothers, which has filed for bankruptcy.

Shares in CIFH fell 4.7 percent to HK$4.90 yesterday. They have gained 0.6 percent this year, beating the local benchmark Hang Seng Index's 42 percent decline, after the parent group offered to buy out other CIFH stockholders at HK$7.60 per share.

CITIC Group is consolidating its financial operations. It announced on June 11 that it would take its 55 percent-owned CIFH private by offering minority shareholders HK$1.46 in cash and one share of China CITIC Bank Corp for each share of CIFH.

In August, the group raised that cash offer by 48 percent. It said it would offer one share in China CITIC Bank plus HK$2.16 in cash for every CIFH share.

Despite the current market turmoil, CITIC Group said it will adhere to that "final offer", and was confident the privatization will succeed.

Ju Weimin, chief financial officer of CITIC Group, said earlier: "The company will not lower the offer amid the market volatility".

(HK Edition 10/17/2008 page2)