Group eyes US$1b stake in Tianjin

PUBLISHED : Wednesday, 09 May, 2012, 12:00am
UPDATED : Wednesday, 09 May, 2012, 12:00am

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An international financial consortium is in the final stage of talks to invest in a state-owned financial conglomerate in Tianjin, one of China's biggest cities.

The consortium comprises D.E. Shaw, one of the world's biggest hedge-fund managers; an investment arm of the state-owned China Everbright Group; and New China Life Insurance, China's fourth-biggest life insurer, industry insiders say.

The consortium plans to buy a stake of roughly 20 per cent in Tianjin TEDA International Holdings Group for about US$1 billion.

TEDA was formerly known as the Tianjin Economic-Technological Development Area.

The group controls Tianjin's major financial assets, including China Bohai Bank, in which Standard Chartered holds a stake of nearly 20 per cent.

To enact the proposed investment, the consortium has set up a yuan-denominated private-equity fund in Tianjin as a so-called special-purpose-vehicle (SPV) to channel funds into TEDA, the insiders say.

SPVs are popular among the world financial community as a way to make direct investments in specific deals and, in some cases, to legally avoid regulatory hurdles.

Given Tianjin's economic and political importance as one of the four municipalities under Beijing's direct oversight, the proposed deal has attracted significant interest in the last few months from foreign and local investors who wish to secure a strong local partner in Tianjin's financial services industry.

The three other centrally-controlled municipalities are Beijing, Shanghai and Chongqing.

'TEDA is just like the Shanghai International Group for Shanghai,' said a person familiar with the matter. 'As a unique platform to control many important state-owned financial assets in Tianjin, once you become an investor and partner of TEDA, you will of course indirectly become an investor and partner of all these subsidiaries.'

Beijing has encouraged some major cities to establish state-owned financial holding firms to bring all important local financial assets under one umbrella to make them easier to manage.

Like TEDA, Shanghai International is the asset platform established by the Shanghai government to control local financial institutions, including the Shanghai Pudong Development Bank.

TEDA, located in Tianjin's Binhai New Area, was established as a local economic hub in the early 1980s and has become key to attracting foreign capital to Tianjin.

In the late 1990s, TEDA won support from the commerce ministry to become a national-level special development zone, encouraging foreign firms like South Korea's Samsung to set up local plants.

The TEDA deal comes amid foreign investors' growing caution about mainland investments, given the potential fallout from the downfall of Chongqing's former party boss Bo Xilai.

Chongqing used to compete with Tianjin in attracting foreign capital in the financial sector. Some industry watchers say Bo's case may affect investment sentiment in Chongqing, but it could also make investment opportunities elsewhere in China look more attractive.