Bank of China Ltd, the nation's third-largest by value, will buy a 20 percent stake in La Compagnie Financiere Edmond De Rothschild for 236 million euros ($342 million) to start an asset-management venture.
Compagnie Financiere Edmond de Rothschild, the French fund-management unit of privately-held bank LCF Rothschild Group, and Beijing-based Bank of China will begin an asset-management and private-banking venture to sell Rothschild's financial products through the 10,800 branches of the Chinese lender, according to a statement released on Thursday.
"Chinese banks are performing in a marvelous way in the current maelstrom that is shaking the global finance," Compagnie Financiere Edmond de Rothschild Chairman Michel Cicurel said at a press conference in Paris.
"Bank of China is perfectly positioned to accompany China's growing middle class" as the lender has more than 20 million accounts of individuals with at least $100,000, Cicurel said.
Compagnie Financiere Edmond de Rothschild "had no need for cash" as it completed the deal, Cicurel said. Bank of China is buying a 10 percent stake from Caisse de Depot et Placement du Quebec, a Canadian pension fund, and the rest will consist in new shares, Cicurel said.
Benjamin de Rothschild, chairman of the supervisory board, will keep a 75 percent stake in LCF Edmond de Rothschild and Bank of China will be the second-largest shareholder in the asset-management company, according to the statement. The firm managed 29.6 billion euros in assets at the end of 2007.
Bank of China "expects that the transaction will provide a reasonable return on investment," the Chinese lender said in a statement to Hong Kong's stock exchange on Thursday. "The bank can further explore opportunities in European and other emerging markets."
Bank of China Vice President Zhu Min also said the company isn't ready to acquire a major US investment bank.
While "very volatile markets present opportunities to buy others, I don't think we have the capability to do that today," Zhu told reporters in Paris.
The bank is still looking at its domestic market for expansion and to increase its competitiveness there, he added.
Compagnie Financiere Edmond de Rothschild, which started operations in Shanghai two years ago, is among the latest international fund managers to start operations in the country to tap growing personal incomes and sovereign wealth funds.
Almost 2,000 funds authorized for sale to individuals managed over $910 billion in assets in Hong Kong by March 2007, according to information from the Hong Kong Investment Funds Association.