What do you get when you cross three conglomerates? Answer: a bigger conglomerate. And no, that’s not funny. Yesterday, Hong Kong-listed Citic Limited, a Chinese state-owned enterprise, announced the sale of a fifth of itself. The stake, made up of old and new shares, will be priced at HK$13.80 per share, or more than $10bn. The buyer, CT Bright, is a joint venture of Tokyo-listed conglomerate Itochu and Thailand’s privately owned Charoen Pokphand Group. Each company owns half of the joint venture, and the two have small stakes in each other.

Citic, with a market capitalisation of $44bn, was formed from the addition of $37bn of Chinese state assets to former Citic Pacific last year. It is an unwieldy beast, with interests from financials to iron ore. Most of its businesses are highly cyclical, and the cycle has not been kind: return on equity in 2013 was less than half the 2007 high of 20 per cent. This seems unlikely to improve soon. Yesterday, Citic announced a $1.4bn-$1.8bn hit to 2014 profits from a writedown at its Australian joint venture, Sino Iron — the equivalent of as much as 30 per cent of 2013 earnings.

For Citic’s buyers, the benefits are unclear. Itochu estimates it will generate annual profits of just under $600m, implying a multiple of 8.8 times. Itochu trades on 6.5 times forecast 2016 earnings, making the deal look dilutive. At best, Itochu and CP Group will gain better contacts for future China business.