Bidding heats up for GDB stake

PUBLISHED : Saturday, 17 September, 2005, 12:00am
UPDATED : Saturday, 17 September, 2005, 12:00am

Troubled Guangdong Development Bank (GDB) has selected six domestic and international firms for the next round of bidding for what could become the first controlling stake sold by a state-controlled bank.

Four foreign investors - DBS, Citigroup, JP Morgan Partners, and United States buyout firm Carlyle Group - will conduct due diligence into the bank this month and participate in further bidding and negotiations, a source said yesterday.

They will be joined by the mainland's second-largest life insurance company, Hong Kong-listed Ping An Insurance, which is transforming itself into a diversified financial holdings company, as well as China Huawen Enterprises Development, a little-known firm believed to be controlled by Communist Party mouthpiece People's Daily.

The six were selected from an initial field of 18 domestic and foreign bidders for the controlling stake earlier this week.

Regulators are believed to be considering a plea to lift the 25 per cent ceiling on combined foreign interest in a mainland bank to attract international capital to help rehabilitate the ailing lender, rather than falling back on the traditional remedy of government funds.

But sources suggest the bank may settle for selling stakes to a pair of investors, including one domestic and one international buyer, to keep foreign equity interest within the regulatory limit of 20 per cent for any single foreign investor, and 25 per cent for combined foreign interest in a mainland bank.

None of the foreign investors that made the grade in the first round of bidding is a stranger to the frenzied merger and acquisition scene in the mainland banking sector, which has attracted global names such as HSBC, Bank of America, Royal Bank of Scotland, Merrill Lynch, Standard Chartered, CitiGroup and Temasek Holdings.

Bank of China International, the offshore investment banking unit of Bank of China, is advising GDB on the share sale.

JP Morgan has been previously linked to China Construction Bank and Bank of China but has yet to take the plunge.

A Carlyle-led consortium last week won a key approval from shareholders in China Pacific Life Insurance, China's third-largest life insurer, to buy 24.9 per cent of the company for US$400 million.