IBM joins Citigroup consortium to bid for stake in Chinese bank
13 Nov 2006
Mumbai:
International Business Machines' (IBM) financial arm
will join a consortium led by Citigroup to bid $3 billion
for an 85-per cent stake in China's Guangdong Development
Bank, market sources said. IBM Global Financing will take
a stake of up to five-per cent stake in the troubled southern
Chinese lender if the Citigroup bid was successful, the
sources said.
The consortium includes top life insurer China Life Insurance
Co of Hong Kong. Citigroup and its wholly-owned Associates
First Capital would take a combined stake between 20 and
21 per cent - above the 20-per cent limit imposed on individual
foreign stakes in Chinese banks and slightly larger than
that of China Life - to become GDB's largest individual
shareholder, sources involved with the bid said.
GDB is IBM's top client, receiving supplies of more than
80-per cent of the bank's IT systems and devices, industry
sources said. A final agreement between the consortium
members is expected to be signed this week, the banker
said.
Citigroup last year won preliminary approval to acquire
over 20 per cent stake in GDB, but that arrangement was
later rejected by regulators. The bid was reopened with
France's Societe Generale joining the fray. Citigroup
and Societe Generale have been locked in a takeover battle
for more than a year, with the sources saying both sides
are bidding about $3 billion for 85 per cent of GDB.
China, which is set to open its banking sector fully to
foreign competition under WTO obligations next month,
has attracted nearly $21 billion in financial services
industry investments since 2001.
Citigroup and Societe Generale are attracted to GDB's
more than 500 branches, rather than the lender's weak
financial shape.
Citigroup is also in talks to increase its stake in Shanghai
Pudong Development
Bank to 20 per cent from less than 5 per cent, and stakes
in both banks would give the firm a footprint in two of
China's richest markets.