In an unprecedented sortie into the global financial market, a
state-owned bank has teamed up with an international partner to
join Europe's most heated competition in a banking takeover.
Yesterday, China Development Bank (CDB) - the largest of the
three policy banks specializing in government-sponsored domestic
infrastructure investment - dramatically increased its
international profile by announcing that it will buy up to 5
percent in London-based Barclays, Britain's third largest
lender.
Barclays is trying to close a merger with ABN Amro, Europe's
eighth largest bank in total assets.
In an official statement, CDB Governor Chen Yuan expressed
"strong support" to the Barclays management's global strategy.
And that support is mainly in cash, John Studzinski, senior
managing director of Blackstone - which is providing financial
advisory services to CDB in its Barclays deal - told China
Daily.
CDB's Barclays deal is the first time that a State-backed
financial organization has become an active player in an
international buyout of a large financial service network.
According to an announcement by CDB, it will join Temasek
Holdings of Singapore to invest up to 13.4 billion euros ($18.5
billion) in Barclays through subscription of shares. And that, in
turn, will provide additional capital for Barclays in its ongoing
bid for Amsterdam-based ABN Amro.
After enlisting the two Asian supporters, Barclays made a
simultaneous announcement revising its bid for ABN Amro, increasing
the offer from an earlier 64 billion euros ($88.4 billion) up to
67.5 billion euros (US$93.3 billion).
With the share issue to CDB and Temasek Holdings, Barclays also
recast its bid for ABN Amro from an all-share offer to a
cash-and-share deal, with cash making up 37 percent of the
total.
CDB will initially subscribe 2.2 billion euros (US$3.04 billion)
of Barclays new ordinary shares, or a 3.1 percent stake of the
private British bank. But if its bid for ABN Amro succeeds,
according to the agreement, CDB will be able to subscribe a further
7.6 billion euros (US$10.5 billion) of Barclays ordinary
shares.
Sun Mingchun, vice-president and chief economist of Lehman
Brothers Asia, saw it as "a very active move" by a Chinese
financial firm in seeking overseas expansion.
"Unlike the embryonic State Investment Company's US$3 billion
subscription in Blackstone's shares in May, which is merely a
financial investment aimed to balance the massive foreign exchange
reserves, CDB's investment is an active move targeted at improving
the bank's management and seeking overseas expansion," Sun
said.
The offering of a 5 percent stake to CDB greatly strengthens
links between Barclays and CDB, transforming their "strong
longstanding relationship" into a "strategic partnership", noted
Bob Diamond, president of Barclays.
Based on yesterday's agreement and a memorandum of
understanding, Barclays will assist and advise CDB in its evolution
into a commercially-operated financial institution.
CDB will also use Barclays Global Investors, a Barclays
subsidiary in investment management, as one of its preferred asset
managers.
The link with CDB will in turn provide Barclays with improved
access to the Chinese market.
(China Daily July 24, 2007)
