CITIC's $37 billion merger has shed some light on the gargantuan task of reforming China's State-owned enterprises (SOEs). The conglomerate is merging its assets, which range from finance to football, into its smaller Hong Kong-listed subsidiary. The result combines listed stakes and a mishmash of smaller businesses. If all goes well, CITIC Pacific shareholders will get a profitable ringside seat in the cleanup.

It's the first time China has cracked open such a large conglomerate. CITIC Pacific investors will acquire assets from the parent company's main operating arm for shares worth $28.4 billion and cash of $8 billion. Since the new shares are being issued at HK$13.48 ($1.73) each, 26 percent above the smaller group's undisturbed 60-day average price, it's equivalent to CITIC Pacific investors having bought the assets at a small discount.

CITIC's sprawl speaks volumes about the way China's centrally managed SOEs have grown. But investors could benefit. Assets that are coming virtually for free, like Beijing's Guo'an football club, may have value for a trophy investor. Unwinding the conglomerate discount could be a source of value if CITIC decides to be more disciplined.

The author is Una Galani, a Reuters columnist.