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)