Source:
https://scmp.com/article/587673/carlyle-waits-wings-dah-sing-wins-nod-chongqing-stake-deal

Carlyle waits in wings as Dah Sing wins nod for Chongqing stake deal

Carlyle Group, the United States private equity firm that failed to buy a 50 per cent stake in Xugong Construction Machinery last year, is still awaiting approval for its first mainland banking acquisition after its Hong Kong partner got the go-ahead for a larger purchase.

Carlyle's partner, Dah Sing Banking Group, last Friday received approval from Yufu Asset Management, the local government asset body, to buy 17 per cent of Chongqing Commercial Bank for 694 million yuan.

Carlyle and Dah Sing, the banking arm of Dah Sing Financial Holdings, signed agreements at the same time in December last year to buy stakes in the Chongqing lender.

Carlyle was not mentioned in the approval letter from the China Banking Regulatory Commission received on March 30, according to a source speaking on behalf of the Chongqing bank. It was not clear when approval would be given to Carlyle.

The CBRC did not return a phone call seeking comment on the deal yesterday. Carlyle declined to comment.

Carlyle, which has reached its first purchase agreement with a mainland bank, planned to buy 7.99 per cent of Chongqing Commercial for 81 million yuan, based on 2.02 yuan per share.

Some analysts blamed the delayed approval on the absence of appropriate procedures. Overseas private equity buyers find it harder than foreign commercial lenders when it comes to acquiring banking assets because of the official attitude regarding identities.

'China has set practices and specific documentation for banks to do joint ventures and make acquisitions. But for other investors, such as private equity groups, it takes much longer because there are no steps to follow,' a source said. 'There's a need to modify the current metrics, review the steps involved and make exemptions and that's what's going on now.'

Last year, Carlyle for unspecified reasons quit a Citigroup-led consortium that was struggling to buy a stake in Guangdong Development Bank. An agreement was eventually reached after Carlyle's departure.

It is a problem facing more than the banking sector, with certain deals in other sectors taking a longer time to win approval or facing recurrent demands for revisions in the agreement terms.

This month, Carlyle reduced its target stake in Xugong Construction to 45 per cent from a 50 per cent target in October last year, which was itself lowered from an agreed 85 per cent stake in October 2005.

Carlyle had to make two attempts - in 2004 and 2005 - to get approval to buy a 25 per cent stake in China Pacific Insurance in partnership with British insurer Prudential Financial.

Chongqing Commercial, which has been restructured to minimise its bad-loan burden, aims to list in Hong Kong next year.

Dah Sing will sign a supplemental agreement with the Chongqing lender soon to finalise their business.

Retail banking would be the focus of the partnership, the mainland lender said yesterday.