UBS eyes opportunities with US$500m stake in BOC
UBS could pay about US$500 million for a minority stake in Bank of China (BOC) in return for investment banking opportunities, the Swiss bank said yesterday.
Although UBS' proposed investment was seen by many sources as a thinly veiled attempt to secure a hotly contended mandate to underwrite BOC's international initial public offering next year, its vaguely worded statement yesterday sparked speculation the two banks might link up to strengthen each other's investment banking business.
'It is envisaged that such a partnership would include commercial co-operation in certain areas of investment banking yet to be agreed,' the Zurich-based bank said.
With BOC reporting shareholders' equity of 205.35 billion yuan at the end of last year and based on the valuations at which two other major mainland peers sold stakes to foreign strategic investors, US$500 million - said to be the upper end of UBS's likely investment - may give UBS a stake of less than 4 per cent in China's largest foreign-exchange lender.
UBS' confirmation of long-standing rumours of stake-purchase negotiations came just a week before BOC is expected to hold a beauty contest among up to 10 international investment banks to select sponsors of its multibillion US dollar international IPO next year.
BOC plans to sell 20 per cent of its shares before listing on one or two stock exchanges selected from four candidate exchanges - Hong Kong, New York, London and China - bank president Li Lihui said.
UBS and Goldman Sachs are seen as frontrunners in the competition for the underwriting mandates, having sponsored the 2002 flotation of BOC's Hong Kong unit alongside BOC's offshore investment banking unit BOC International (BOCI).
The world's seven-largest bank and BOC may also co-operate on wholesale banking business, a source said.
However, UBS' announcement yesterday also triggered speculation that the two financial institutions' investment banking businesses may forge closer relationships.
A link-up with BOCI could aid the efforts of UBS to expand its investment banking clientele in China, SBI E2-Capital executive director Ronald Ten-lap Wan said.
