Citigroup-Led Team Is Poised To Win Guangdong Bank Battle
SHANGHAI -- A consortium led by Citigroup Inc. is set to be named "preferred bidder" to buy 85% of China's Guangdong Development Bank in a deal valued around $3.1 billion, according to people with knowledge of the plan.
The decision, set to be announced Thursday, would mark an important development in a takeover battle that offers the potential for reshaping how foreign banks operate in the fast-growing market. Under the current plan, the Citigroup consortium would run the bank day-to-day, with so-called "operational control," according to the people with knowledge of the plan.
Citigroup itself would own the regulatory maximum of just under 20% of the south China lender, which is known as GDB. The New York banking giant is to be joined in its group by International Business Machines Corp., which would hold around 5%, filling out the maximum 25% that regulations say foreigners can own in Chinese banks. Other partners in the consortium are Chinese, including State Grid Corp. and China Life Insurance Co., each with 20%.
In the politically charged battle, Citigroup appears to have snatched a big lead on bidders including consortiums led by France's Société Générale SA and China's Ping An Insurance Co. Still, any final agreement is subject to a number of approvals, people knowledgeable about the plan said.
Citigroup and GDB declined comment, while a Societe Generale spokesman couldn't reached.
A deal for Guangdong Development Bank, with 501 branches and about $48 billion assets, would strengthen Citigroup's China operation during a pivotal year. It would give the U.S. bank, which has branches in only six Chinese cities, a significantly bigger footprint to compete against local banks and key foreign rivals such as HSBC Holdings Plc, which operates full branches in 13 cities through two subsidiaries, plus owns nearly 20% of China's fifth biggest bank.
With GDB, Citigroup will be anchored to a big regional player in each of China's two richest and most economically vibrant regions, southern Guangdong province, adjacent to Hong Kong. and the seaboard city of Shanghai. Despite China's vast size and plans by China to open the entire nation soon to foreign banking, "you still want to be (mostly) in the south and the east," says a Citigroup banker.
GDB has a national license but the majority of its branches are located in Guangdong, the industrial province abutting Hong Kong. The province has taken the lion's share of foreign direct investment moving into China in recent years and has among the highest incomes nationwide.
But as a bank, GDB is considered weak, in need of both management expertise and restructuring. The bank, which is owned by the provincial government of Guangdong, reported unaudited results for the first half of the year showing profit of about $210 million.
The GDB deal is potentially path breaking for foreign banking in China overall, as it gives the U.S. lender rare ability to control operations of a local lender. Citigroup and its co-investors will be the biggest single stakeholders in GDB, with a right to appoint the largest block of directors who can therefore guide GDB's broad strategy.
The Citigroup team would have rights to set day-to-day strategy at GDB, but won't have a level of oversight called "management control," according to people knowledgeable about the transaction.
Citigroup also gets much less than it originally sought of GDB: a near controlling stake for itself. Citigroup's hard-fought campaign to obtain majority ownership of GDB failed in the face of unbending bank takeover laws in China -- backed up by a tinge of nationalistic rhetoric.
As the takeover battle continued throughout this year, it elicited comment from the senior-most levels of China's government and high-level U.S. officials as well. Analysts were split whether Citigroup was doing itself a disservice with sometimes-prickly regulators by so directly challenging rules that limit single foreign purchasers. Officials at the bank's own partner in China, Shanghai Pudong Development Bank Co., said they were miffed when informed last year that Citigroup was bidding for a big stake in GDB.
Timing of the decision to permit a group to manage a Chinese bank is significant. Beijing is obligated at the end of 2006 to allow foreign banks to compete for the $2 trillion that individuals have on deposit at Chinese banks. The pledge to liberalize China's banking market by December is one of the most important obligations outlined in China's 2001 agreement to join the World Trade Organization.
Yet there are strong indications that access to Chinese retail depositors will be more complicated than once hoped. Instead of going into the market on their own, several foreign banks have signed partnerships with Chinese banks. Citigroup's planned stake in GDB, and a smaller investment in a Shanghai bank announced nearly four years ago, will help extend Citigroup's reach beyond what appears possible under its own banner.
Chinese banks have been a favored investment by counterparts overseas since around 2002. Citigroup did one of the first, buying a fractional stake in Shanghai Pudong Development Bank for $67 million. Though Citigroup's original stake has been pared back to around 4%, the value of its investment has roughly doubled since the deal was announced. Citigroup also has rights to eventually lift its investment to 19.9%.
In terms of percentage of a Chinese bank owned by a foreign entity, the biggest stake purchase was HSBC's $1.75 billion deal in August 2004 for 19.9% of 2,700-branch Bank of Communications Co. HSBC also has an equity position in Bank of Shanghai Co.
花旗牵头财团有望赢得广发行收购战
据知情人士透露，由花旗集团(Citigroup)牵头的一个财团在对中国广东发展银行(Guangdong Development Bank)的争夺战中有望被定为“优先竞购方”。该财团计划出资31亿美元收购广发行85%的股份。
上述消息可能会在周四宣布。它将是广发行争夺战中的一个重要进展，由此，外资银行在中国市场也将迎来重新布局的机会。据知情人士说，根据现有计划，花旗财团将获得该行的“经营控制权”，负责它的日常经营。
花旗集团自己将在该行获得接近20%的股份，这也是中国目前已有法规规定的上限。与花旗联手竞购的公司里包括国际商业机器公司(IBM)，它将持有5%的股份。它们两家合计接近25%的持股也是外资在中国单一一家银行允许的持股上限。花旗财团的其他参与方均为中方机构，其中包括国家电网公司(State Grid Corp)和中国人寿(China Life Insurance Co.)。这两家公司将分别持有20%股份。
在这场掺杂了相当政治因素的争夺中，花旗财团在各竞购方中似乎占据了上风。参与竞购的还有分别由法国兴业银行(Societe Generale SA)和中国平安保险(Ping An Insurance Co.)牵头的两家财团。不过知情人士说，最后能否达成协议还需得到多方的同意。
花旗集团和广发行不予置评，记者未能联系到法国兴业银行的发言人。
同广发行的交易将在至为关键的一年中加强花旗集团的中国业务。这将使仅在中国6个城市设有分支机构的花旗集团获得更坚实的立足点，同本地银行和汇丰控股(HSBC Holdings Plc)等主要海外对手进行竞争。
汇丰控股的两家子公司在中国大陆13个城市设有分支机构，并持有中国第五大银行近20%的股份。广发行共有501家分支行，总资产约为480亿美元。
凭借着广发行，花旗集团将一跃成为中国两大最富裕、最有活力的区域──广东和上海──的重要地区性银行。尽管中国地域辽阔，而且政府计划很快向海外银行业全面开放国内市场，但花旗集团一位银行家表示，南方和东部的吸引力最大。
广发行拥有全国性的经营牌照，但大部分分支机构都位于广东省。近年来进入中国的海外直接投资有很大一部分都涌入了广东，而且广东也是全国收入最高的省份之一。
但广发行却存在着薄弱环节，不但需要管理经验，也需要进行重组。该行由广东省政府控股，今年上半年未经审计的利润约为2.1亿美元。
同广发行的交易可能是外资银行业在中国的一个突破，因为花旗集团将能够控制当地银行的经营权，这种情况并不多见。花旗集团及其合作投资者将成为广发行的最大单一股东，有权任命的董事比例最大，从而主导广发行的总体战略。
知情人士透露，花旗集团的团队将有权制定广发行的日常策略，但不会拥有“管理层控制”这一监督层面上的权力。
这距花旗集团最初的目标──单独持有接近控股权的股份──要低了很多。面对中国的银行收购法以及国家主义的声潮，花旗集团获得多数控股权的不懈努力最终以失败告终。
随着收购大战延续到今年，中国和美国政府的高官也对此发表了评论。分析师对花旗集团直接挑战中国收购规定是否将损害会同监管机构的关系也存在不同的看法。该行在中国的合作伙伴上海浦东发展银行(Shanghai Pudong Development Bank Co.)的管理人士称，当去年得知花旗集团竞购广发行多数股份时，他们感到有些恼火。
允许海外集团管理中国银行的决策时机也至关重要。中国政府必须在2006年底向海外银行开放个人人民币业务，让它们也有机会参与争夺个人在中国各银行的2万亿美元存款。在12月份开放中国银行业市场是中国2001年加入世界贸易组织(World Trade Organization)时最重要的承诺之一。
不过，有越来越多的迹象显示，在华开展零售业务要比当初的预想复杂得多。几家海外银行同中国的银行签订了合作协议，而没有选择自己进入这个市场。花旗集团持股广发行、以及近4年前对一家上海银行的投资都有助于该行在自己能够经营的业务之外扩大在华业务。
自2002年来，中国的银行就成为深受海外银行青睐的投资选择。花旗集团就是先行者之一，以6,700万美元收购了上海浦东发展银行的小部分股份。尽管花旗集团当初持有的股份已经被稀释到4%左右，但其投资的价值却已经较宣布此项交易时增长了一倍左右。花旗集团还拥有最终将持股比例增加到19.9%的权利。
按外资银行持有中国银行的股份比例衡量，最大的一次收购是2004年8月汇丰控股以17.5亿美元购买了拥有2,700家分支机构的交通银行(Bank of Communications) 19.9%的股份。汇丰控股还持有上海银行(Bank of Shanghai)的股权。
KATE LINEBAUGH / JAMES T. AREDDY
