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A consortium made up of Deutsche Bank and Sal Oppenheim jr & Cie KGaA Monday signed a binding agreement with Huaxia Bank to buy a total of 587.2 million shares. This amounts to a 14-percent share of the Beijing-based joint stock bank.
Subject to regulatory approval, the consortium will purchase the shares from the 18 shareholders of Huaxia Bank for 272 million Euros (US$329 million).
Deutsche Bank will take 9.9 percent, while Sal Oppenheim jr & Cie KGaA will take 4.1 percent.
After the stake sale, the original first two shareholders of Huaxia - steel heavyweight Shougang Group and Shandong Electric Power Corporation - would reduce their shareholdings to 11.9 percent and 9.52 percent respectively.
The consortium will buy Huaxia's shares for 4.42 yuan (55 US cents) each, higher than the bank's closing price of 4.18 yuan (52 US cents) at the Shanghai Stock Exchange yesterday.
Deutsche Bank and Huaxia Bank will also enter into a wide-ranging co-operation agreement. This will include the banks' teaming up in such things as credit cards, "affluent customer" business, the distribution of investment products and cash management services.
Deutsche Bank will also provide comprehensive technical support and assistance to Huaxia Bank in relation to risk management, retail and corporate banking and governance. Initially, Deutsche Bank will also be granted one seat on Huaxia's board.
The co-operation between Huaxia Bank and Deutsche Bank will deliver exciting opportunities for both and realize significant mutual benefits, said Liu Haiyan, Chairman of Huaxia Bank.
Rainer Neske, a member of the group executive committee of Deutsche Bank, agreed. "At Huaxia Bank, we have a strong and respected strategic partner in China, which is an important growth market for Deutsche Bank.
This investment will enable us to participate directly in the development of China's retail financial services sector.
There is a significant opportunity to leverage our international retail and financial product expertise into this exciting market."
Some analysts were not convinced Huaxia was the best choice for the German bank.
But Dong Chen, an analyst with CITIC Jianyin Securities, said the enterprise had few options left since most of China's banks had already invited foreign strategic investors. The analyst also believed that the investment in Huaxia was too small to satisfy the German banking heavyweight.
Huaxia said in April that it was planning to sell a 25-percent stake. It also disclosed it was in talks with BNP Paribas SA, Sumitomo Mitsui Financial Group Inc and DBS Group Holdings Ltd as well as Deutsche Bank and Societe Generale.
Established in 1992 with a registration capital of 4.2 billion yuan (US$520 million), Huaxia was listed on Shanghai's A-share market in 2003. It has branches in 27 Chinese cities and is focusing on developing business in the economically developed and resources-rich Yangtze Delta region, the Bohai region, and economic centres in central and western China.
Its 2005 interim reports show that in the first half of 2005, Huaxia Bank's total assets has reached 323.9 billion yuan (US$40 billion), with good quality assets, and increased profitability.
(China Daily October 18, 2005)
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