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Citigroup-led venture bids for Chinese bank

A Citigroup-led consortium has won the right to buy 85 percent of China’s Guangdong Development Bank for $3.2 billion, beating rival groups led by ABN AMRO and Societe Generale, three sources close to the deal said.
/ Source: Reuters

A Citigroup-led consortium has won the right to buy 85 percent of China’s Guangdong Development Bank for $3.2 billion, beating rival groups led by ABN AMRO and Societe Generale, three sources close to the deal said.

The purchase would grant the world’s top financial services company unusually large influence over a single medium-sized Chinese lender, at a time when local interests complain that foreign firms are acquiring stakes in Chinese banks on the cheap.

Six officials from the bank regulator, the central bank and the Guangdong provincial government made their decision during a closed-door meeting at Guangdong Bank’s headquarters in Guangzhou late on Thursday, a source close to the Chinese bank and a second source familiar with the deal told Reuters on Thursday.

Bidders had been informed of the group’s decision in Beijing on Friday, which now awaited final cabinet approval, said a third source who attended meetings in the capital aimed at briefing the parties involved.

The six-person group would submit minutes of Friday’s meeting to the cabinet, or State Council, within days.

Citigroup will kick off exclusive negotiations with Guangdong Bank as early as next week on technical areas including staff benefits, IT support and new management, two sources said.

“Unless the exclusive negotiations fail unexpectedly, or the cabinet refuses to approve the deal, there’s no longer any chance for other bidders,” a senior executive close to Guangdong Bank told Reuters on condition of anonymity.

The Citigroup-led consortium includes major state-owned firms, including China National Cereals, Oils & Foodstuffs Corp., and at least one foreign investor, the second source said.

Citigroup aims to take nearly 50 percent of the bank, with the remainder going to its partners, all three sources said.

“Citigroup will take some board seats and have the right to appoint both the new chairman and president,” the senior executive added. “And the bank will list shares eventually.”

Citigroup and Societe Generale declined to comment on Friday. ABN AMRO officials were not immediately available for comment.

The meeting dragged on into the evening on Friday, as officials and banking executives pored over a final document that would be sent to the cabinet. A source familiar with the proceedings said the only way Citigroup would now fail would be if the cabinet vetoed the deal.