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Royal Bank of Scotland to buy 10%
of BOC
BEIJING - The Bank
of China (BOC) announced August 18 that it had
signed a strategic investment and cooperation
agreement with the Royal Bank of Scotland Group
(RBS), according to which RBS will acquire a 10%
stake in BOC for US$3.1 billion. Under the deal,
RBS would pay $1.6 billion and Merrill Lynch and
the Li Ka-shing Foundation, run by the legendary
Hong Kong tycoon of the same name, will contribute
the remaining $1.5 billion. The transaction is
subject to the government and other relevant
regulatory approvals, said sources with the BOC.
If the deal goes through, it would become the
largest-ever foreign investment in China's banking
sector.
As a key component of the
strategic cooperation, the BOC, one of the largest
Chinese commercial banks, and RBS, Europe's second
largest and the world's sixth largest banking
group, will enter into broad cooperation in a
range of areas including credit cards,wealth
management, corporate banking and personal lines
of insurance. In addition, the two banks intend to
establish a close cooperative relationship in
major banking managerial areas, including
corporate governance, risk management, financial
management, human resources management and
information technology.
According to the
agreement, RBS will also appoint a representative
to serve on the board of directors of the BOC.
"RBS is an ideal partner," said Xiao Gang,
chairman of the BOC. "The cooperation with RBS is
a substantial step in [the] BOC's joint stock
reform, and is crucial to transforming the
operational structure, enhancing the internal
management, improving the competitiveness and
promoting profitability," he said.
Wang
Jianxi, vice chairman of Central Huijin Investment
Co Ltd, the major shareholder of the BOC, said
bringing in international strategic investors is
an important step in the deepening of the reform
of state-owned commercial banks in China. "Through
strategic cooperation with RBS, [the] BOC will be
able to further enhance its corporate governance
and internal control. We are confident that the
strategic cooperation between BOC and RBS will
produce positive results for both sides," he said.
Sir George Mathewson, chairman of RBS, added: "The
RBS Board believes that the size and growth of
China represents an important opportunity. The
combination of BOC's brand, distribution and
customer base with RBS' product and operational
strengths and experience will be powerful in the
Chinese market."
Deal seen as coup for
RBS
Analysts saw the deal as a major coup
for the RBS Group, especially its chief executive
Fred Goodwin, who had spent 18 months arranging
the transaction. The Scottish native has become
known for bold acquisitions, starting with his
US$37 billion hostile takeover of National
Westminster Bank in 2000 and the subsequent $10.5
billion purchase of Charter One Financial in
Cleveland in 2004. Investors reacted positively to
the Bank of China deal, with RBS shares rising
nearly 2% on the London exchange.
Goodwin
has singled out the credit-card business as a
particularly promising prospect in China. He
expects the Bank of China to contribute its
customer base and distribution channels, while RBS
will offer marketing and credit-evaluation
competencies. "[The deal has] got the potential to
add up to something more than the sum of the
parts," Goodwin said in a conference call with
reporters on August 18.
More foreign
deals expected
The Hong Kong and Shanghai
Banking Corporation (HSBC), the Bank of America
(BoA), and Singapore's Temasek Holdings have all
recently bought large stakes in Chinese banks.
Foreign investors are eager to get a foothold in
the fastest-growing major economy in the world and
tap into its emerging middle and upper classes, in
the hope of offering financial services. Numerous
future deals have been rumored. With respect to
the BOC, Union Bank of Switzerland (UBS) is said
to be in continuous talks after announcing in June
that it may invest $500 million in the Chinese
bank. Goldman Sachs and a German bank, Allianz,
are in talks to pay about $1 billion for a stake
in the largest state-owned bank, the Industrial
and Commercial Bank of China, according to people
familiar with the talks.
(Asia
Pulse/XIC) |
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