Citi bids US$1.5b for local bank stake
(Shenzhen Daily/Agencies)
Updated: 2005-12-15 08:59

Citigroup Inc. has put in the highest bid in a four-way battle for Guangdong Development Bank offering to pay about US$1.5 billion for up to an unprecedented 50 percent stake, four sources close to the deal said.

Citigroup, vying with ABN AMRO, Societe Generale and DBS Group Holdings for a slice of Guangdong Development Bank, a mid-sized Chinese lender, wants as much as half of the lender if regulators allow, three banking sources and one government source close to the situation said.

The quartet of foreign firms — whittled down from a list of 20 potential buyers — submitted final bids for Guangdong bank in November, sources said earlier. But they were subsequently granted another month to tweak their bids.

The Central Government is now expected to make its decision by early 2006, though Citigroup’s bid hinged upon whether regulators would relax a much-debated ownership cap of 20 percent set for a single foreign firm, the sources said. Should the Central Government decline to do so, ABN AMRO and SocGen would stand an equal chance, they added.

“Last night (Dec. 13) was the final deadline, and we’ve sealed all bidding documents, which means nobody can change anything any more,” said a senior executive with Guangdong bank, involved in the negotiation process.”Among the bidders, Citigroup’s price was the highest — more than two yuan a share — and ABN AMRO’s price was about the same as SocGen’s, nearly two yuan.”

Three other sources confirmed the pricing details. Citigroup declined comment yesterday.

China is encouraging local lenders to seek out foreign capital and expertise. Overseas investors want to access the country’s US$1.7 trillion in personal savings.

Guangdong bank is the second-largest lender in the affluent Guangdong Province and now plans to sell 85 percent of its totalled 12.5 billion shares to several new shareholders from home and abroad, the sources said.

Citigroup, trying to catch up with rivals such as HSBC Holdings Plc. that have bigger stakes in the country’s financial industry, is also eager to quadruple its slice of Shanghai Pudong Development Bank, of which it now holds 4.62 percent.

DBS, the sole Asian bidder, was understood to have failed because of its low bidding price of about 1.6 yuan a share, the first executive said on condition of anonymity.

Guangdong bank is expected to be restructured into “a completely new and clean bank, targeting a capital-adequacy ratio above 9 percent in two years’ time”, according to a second source familiar with the reform plan.

“By then, the bank will be qualified to go for an overseas listing,” said the source familiar with the situation.

“Actually, what Citigroup is now trying to buy is not the existing bank, but a totally new bank,” said the source, who also declined to be identified.