State-owned Chinese conglomerate Cofco had began its HKD14.2 billion or USD1.8 billion reverse takeover bid on Tuesday. HSBC has been tasked to sponsor and act as financial adviser of the reverse takeover.

A reverse takeover, or also called a reverse IPO or a reverse merger, would have a private company acquire a public company. This is so that the private company can skip over the lengthy and sometimes arduous process of going public. The process would require the private company reorganizing its capitalization.

Cofco would be placing its 12 property projects located across China into its subsidiary the Hong Kong Parkview Group. The 12 property projects would include offices, hotels, shopping malls and apartments in China. Parkview would be issuing new shares equivalent to 19 times its outstanding shares. The share price would be at USD2, which is already discounted by half of its mrket trading price  prior to the announcement.

The pricing was reportedly favorable to Parkview, a tiny holding company, who would be renamed as Cofco Land. The directors said in its message on Tuesday, "The recent trading levels cannot be taken as the true value of the shares because there appeared to be a lack of correlation between the current trading price of the shares and the underlying business operations or financial performance of the company."