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Citigroup raises bid for Guangdong bank
By Cathy Chan (China Daily)
Updated: 2005-12-31 07:11
Citigroup Inc, the world's biggest bank, raised its bid for Guangdong
Development Bank to 24.1 billion yuan (US$3 billion), trumping two rival offers
for the State-owned Chinese lender, sources involved in the talks said.
The US bank and local partners added more than 1 billion yuan (US$123.3
million) to their bid for an 85 per cent stake, they added. France's Societe
Generale and China's Ping An Insurance (Group) Co offered less for the
Guangzhou-based bank, which has 26 branches in South China's Guangdong Province.
Citigroup would become the first overseas investor to buy control of a
State-owned bank in China, whose economy has grown at an average pace of 9.5 per
cent since 1978. The government is considering waiving ownership limits to cut
the cost of bailing out the province's second-largest lender.
"Taking management control in a medium-sized bank would provide a lot of
value after the lender is restructured," said Andrew Chan, an investment analyst
at Pacific Sun Investment Management in Hong Kong. "Everyone wants to form their
own China strategy in the banking sector and what they're prepared to pay now
reflects expectations for future loan growth."
Citigroup would be paying more than twice the bank's book value for a stake
of less than 50 per cent, with Chinese partners owning the rest, the people
said.
US and European banks are seeking investments to gain access to US$1.7
trillion in household savings in an economy that may overtake the UK this year
as the world's fourth-largest. China's rules now limit overseas investors to
owning less than 20 per cent of Chinese banks.
Ping An, China's second-largest insurer, offered 22.6 billion yuan (US$2.8
billion) for the stake, the lowest price among the three groups, the sources
said. Societe Generale, teaming up with China Huawen Investment Holdings, is
bidding 23.5 billion yuan (US$2.9 billion).
The Guangdong municipal government, which controls the southern Chinese
lender, may decide on the buyer before mid-January. The final bid prices were
divulged by Guangdong Development Bank in a meeting attended by more than 50
people on Wednesday.
New York-based Citigroup has trailed rivals such as HSBC Holdings Plc after
missing a chance to invest in China Construction Bank earlier this year.
Citigroup has six branches in China, compared with 12 operated by HSBC.
Citigroup Chief Executive Officer Charles Prince, 55, said in an interview in
November that the bank is seeking to avoid buying anything less than majority
control of Chinese finance companies.
The bank agreed this week to quadruple its stake in Shanghai Pudong
Development Bank Co to 20 per cent. The stake may cost the US lender about
US$878 million, based on the latest price and number of outstanding shares.
Pudong Bank has 335 branches nationwide.
Citigroup may take between 40 and 45 per cent of Guangdong Development,
pending further discussions with Chinese partners, people familiar said last
week.
Ping An is partnering with ABN Amro Holding NV, the biggest Dutch lender. The
Shenzhen-based insurer said in June it plans to expand its banking, securities,
and asset management businesses. The company owns Ping An Bank, renamed from
Fujian Asian Bank after being taken over by Ping An and HSBC in 2003.
Ping An plans to buy 80 per cent of Guangdong Development Bank, with the
remaining 5 per cent to be purchased by ABN Amro, the sources said on Thursday.
Societe Generale is asking to buy between 20 and 25 per cent of the lender.
(China Daily 12/31/2005 page5)
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