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Royal Bank of Scotland picks up five per cent stake in Bank of China
London: The Royal Bank of Scotland has sealed a long-anticipated deal with the Bank of China yesterday, making a £1.7bn investment that will give the British bank and co-investors a 10 per cent stake in China's second-largest lender.

The deal, which will see RBS invest $1.6bn, will give Britain's second-largest bank a toehold in the world's fastest-growing economy. RBS is funding the investment by selling its 2.2 per cent stake in the Spanish bank Santander for £900mn.

While RBS's own investment gives it a stake of a little more than 5 per cent in Bank of China, it will have control over the full 10 per cent stake on behalf of its co-investors, Merrill Lynch and Li Ka-shing, the Hong-Kong based tycoon who controls Hutchison Whampoa. They have committed to stay in the deal for three years.

The deal does carry some risks, as the Bank of China has been embroiled in two banking scandals this year and has struggled with bad loans. RBS expects the deal, which requires approval British and Chinese regulators, to be completed in the fourth quarter and to boost earnings from next year.

The deal will give RBS, which currently only has small corporate banking operations in Shanghai and Beijing, access to Bank of China's 11,307 branches and a 14 per cent share of the deposits market while enabling the Chinese bank to tap the British bank's expertise in fields such as risk management.

Western banks are vying to get a foothold in China, which is set to open up its financial sector fully to foreign competition by the end of next year. HSBC owns stakes in three Chinese banks, including a 19.9 per cent holding in Bank of Communications, the country's fifth-largest lender. In June, Bank of America struck a deal to pay US$3bn for 9 per cent of China Construction Bank. Analysts said RBS and partners were paying about 1.2 times the 2004 book value of Bank of China, in line with the Bank of America deal.
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Tommy Hilfiger up for sale
New York: Fashion retailer, Tommy Hilfiger, has put itself up for sale in an auction likely to raise more than US$1.5bn (£840m).
The company, founded by the US designer of the same name, is understood to have been approached in the past few months by a potential buyer and is also rumoured to be considering bids from private-equity firms and other retailers.

Hilfiger is understood to have hired JP Morgan to handle the auction. The investment bank would not comment. The move comes after Hilfiger, which is based in Hong Kong, ended an 11-month federal investigation by agreeing last week to pay a total of US$18.1mn in back taxes and interest.

Potential buyers include Jones Apparel, whose brands include Nine West and Anne Klein, and Liz Claiborne. Both focus mainly on women's clothes and could use an acquisition of Hilfiger to get into menswear.

Hilfiger, which has suffered from a decline in revenues, says on its website its clothes are meant to convey "the spirit of the American dream". It has been restructuring over the past two years after closing most of its speciality stores and cutting back some of its wholesale distribution.

The company, which started as a retailer of men's jeans and sportswear, has expanded to include clothes for women and children, as well as perfume, glasses, shoes and home furnishings.

In its full year ended 31 March 2005, net revenues fell 5 per cent to US$1.78bn. The decline reflected the fact that US sales have slowed in clothing for men, women and children. Europe sales are still enjoying growth.

A sale of Hilfiger, which has a market capitalisation of $1.5bn and is debt-free, would be the latest example of consolidation among retailers. Federated Department Stores, which owns Bloomingdale's and Macy's, agreed to buy its rival May, the owner of Lord & Taylor's and Marshall Field's, for $11bn in February.
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