In an unprecedented sortie into the global financial market, a State-owned
bank has teamed up with an international partner to join Europe's most heated
competition in a banking takeover.
Yesterday, China Development Bank (CDB) - the largest of the three policy
banks specializing in government-sponsored domestic infrastructure investment -
dramatically increased its international profile by announcing that it will buy
up to 5 percent in London-based Barclays, Britain's third largest lender.
Barclays is trying to close a merger with ABN Amro, Europe's eighth largest
bank in total assets.
official statement, CDB Governor Chen Yuan expressed "strong support" to the
Barclays management's global strategy.
And that support is mainly in cash, John Studzinski, senior managing director
of Blackstone - which is providing financial advisory services to CDB in its
Barclays deal - told China Daily.
CDB's Barclays deal is the first time that a State-backed financial
organization has become an active player in an international buyout of a large
financial service network.
According to an announcement by CDB, it will join Temasek Holdings of
Singapore to invest up to 13.4 billion euros ($18.5 billion) in Barclays through
subscription of shares. And that, in turn, will provide additional capital for
Barclays in its ongoing bid for Amsterdam-based ABN Amro.
After enlisting the two Asian supporters, Barclays made a simultaneous
announcement revising its bid for ABN Amro, increasing the offer from an earlier
64 billion euros ($88.4 billion) up to 67.5 billion euros ($93.3 billion).
With the share issue to CDB and Temasek Holdings, Barclays also recast its
bid for ABN Amro from an all-share offer to a cash-and-share deal, with cash
making up 37 percent of the total.
CDB will initially subscribe 2.2 billion euros ($3.04 billion) of Barclays
new ordinary shares, or a 3.1 percent stake of the private British bank. But if
its bid for ABN Amro succeeds, according to the agreement, CDB will be able to
subscribe a further 7.6 billion euros ($10.5 billion) of Barclays ordinary
Sun Mingchun, vice-president and chief economist of Lehman Brothers Asia, saw
it as "a very active move" by a Chinese financial firm in seeking overseas
"Unlike the embryonic State Investment Company's $3 billion subscription in
Blackstone's shares in May, which is merely a financial investment aimed to
balance the massive foreign exchange reserves, CDB's investment is an active
move targeted at improving the bank's management and seeking overseas
expansion," Sun said.
The offering of a 5 percent stake to CDB greatly strengthens links between
Barclays and CDB, transforming their "strong longstanding relationship" into a
"strategic partnership", noted Bob Diamond, president of Barclays.
Based on yesterday's agreement and a memorandum of understanding, Barclays
will assist and advise CDB in its evolution into a commercially-operated
CDB will also use Barclays Global Investors, a Barclays subsidiary in
investment management, as one of its preferred asset mangers.
The link with CDB will in turn provide Barclays with improved access to the
(China Daily 07/24/2007 page1)