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Citibank cuts shareholding but insists on management right in Guangdong Development Bank |
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Written by Administrator
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Friday, 14 July 2006 |
BEIJING, July 14 (InfoChina) – Citibank Group, which once eyed a 45% stake in the Guangdong Development Bank (GDB), has agreed to reduce its shareholding to 20% and let China Life Insurance Co., Ltd. (NYSE: LFC, HK: 2628) to have a 20%.
In spite of the trimmed shareholding, Citibank will still request for management right in the local bank, according to sources familiar with the deal.
Citibank did this to make its bidding scheme to meet related government requirements, which cap collective foreign shareholding in a domestic commercial bank at 25% and single foreign shareholding at 20%.
Citibank used to plan a 45% stake in GDB, but that was turned down by China Banking Regulatory Commission (CBRC).
In the latest round of negotiation launched in June, the Citibank-led investment consortium agreed to cut their shareholding target from 85% to 80% and Citibank’s planned 45% stake was reduced to 40%.
To get the management right in the Guangdong bank, Citibank may reach agreements with other members of the consortium, such as China Life, PetroChina (NYSE: PTR), China National Cereals, Oils& Foodstuffs Corp and Carlyle Group, market watchers say.
These investors may merely have the right to share dividends while Citibank will get involved in the daily operation of the local bank.
Sources close to the deal say the bidding race on GDB reshuffle has ended the Citibank-led consortium offered the highest price.
The restructuring scheme by the consortium has not been handed to State Council for approval yet. The local Guangdong provincial government hopes the reshuffle can be finished in 2006 and has shouldered approximately 30 billion yuan of non-performing loans from GDB.
GDB employees, however, hope the reshuffle can be wrapped up in the third quarter, saying that will minimize negative impacts from the reshuffle.
But most of the initiatives on the reshuffle lie in the hands of the local government and the ultimate say lies in CBRC.
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China Stock News