ICBC to buy 60% stake in S Africa’s Standard Bank unit for $765 mn

Industrial & Commercial Bank of China Ltd (ICBC), the world's largest lender by assets, today agreed to buy a 60 per cent controlling stake in South Africa's Standard Bank Group Ltd (SBK)'s markets unit Standard Bank Plc (SB Plc), for about $765 million.

The transaction is expected to close in the fourth quarter of 2014 subject to approvals and clearances form shareholders of Standard Bank Group and various agencies including the South African Reserve Bank, Chinese Banking Regulatory Commission, UK's Prudential Regulation Authority among others.

The deal comes six years after China's biggest lender acquired a 20-per cent stake in Standard Bank for $5.4 billion, and a year after it acquired 80 per cent of Standard Bank's Argentine unit for an undisclosed sum.

Standard Bank's global markets unit focuses on commodities, fixed income, currencies, credit, and equities products.

The business is controlled by the bank's UK operation Standard Bank Plc, and ICBC will acquire the 60-per cent stake in Standard Bank Plc from Standard Bank London Holdings (SBLH), a wholly-owned subsidiary of Standard Bank Group.

Assuming a net asset value of the Standard Bank Plc of $1.4 million and deductions, the deal is valued at around $765 million.

Under the deal, the Johannesburg-based lender granted the Chinese bank a five-year option to purchase an additional 20-per cent interest in global markets for up to $500 million in cash and on exercising that option, a further five-year option to buy the remaining stake for $600 million.

Listed on the JSE with a secondary listing on the Namibian Stock Exchange, Standard Bank is the largest African bank by earnings and assets.

Standard Bank London Holdings is an intermediate holding company established in the UK and a wholly owned subsidiary of Standard Bank.

SB Plc is wholly owned by Standard Bank through Standard Bank London Holdings Limited. With full banking licenses, SB Plc has an active global markets business especially in emerging markets, as well as in trading commodities and providing global markets solutions.

In addition to the global markets business, which includes commodities, foreign exchange, interest rates, credit and equity trading, SB Plc has also historically been engaged in other businesses such as corporate lending and investment banking.

Under the share sale and purchase agreement, SB Plc will carve out all businesses not related to the global markets business prior to completion of the transaction.

Following the completion of the carve-out and re-organisation, SB Plc will become a bank dedicated to the global markets business, providing services to global clients through its affiliates and operations in the London, New York, Singapore, Hong Kong, Dubai, Tokyo and Shanghai.

Jianqing Jiang, chairman of ICBC, said, ''By leveraging SB Plc's global markets business platform, mature business model, and industrial expertise, this transaction will elevate ICBC's global markets capabilities in business development, risk management, operations, and innovation in order to better serve our clients' needs.''

Ben Kruger, joint chief executive officer of Standard Bank said, ''The strength and reach of ICBC, our strategic partner, will open a wide range of new business opportunities for the global markets business, while continuing to serve Standard Bank's African clients as their economies continue to grow and develop.''

The global markets business has been in operation since early 1990s and at present it maintains the Standard Bank Group's position as a significant market participant in commodities trading.

''Through introducing ICBC as majority shareholder, the partners are creating a new and larger commodity and financial markets platform and expanding the strategic emphasis for the global markets business to include a focus on China by becoming part of China's leading banking group,'' Standard Bank said.

China, the world's second-largest economy with robust economic growth, is the world's largest consumer of natural resources and its businesses are expanding rapidly beyond its borders.

Standard Bank hopes that the deal would provide exciting franchise and revenue growth opportunities for the markets unit while maintaining its African business.