Citigroup-Led Group Wins China Bank Bid

Thursday, November 16, 2006

By EILEEN ALT POWELL, AP Business Writer

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NEW YORK — Citigroup Inc., America's largest banking institution, confirmed on Thursday that a Citigroup-led consortium has been selected to acquire a majority stake in one of China's biggest regional financial institutions, Guangdong Development Bank.

The consortium will acquire an 85.6 percent stake in GDB for 24.267 billion yuan, or $3.06 billion, Citigroup said.

New York-based Citigroup itself will hold a 20 percent stake _ under the 25 percent maximum allowed by Chinese government regulations. International Business Machines Corp., headquartered in Armonk, N.Y., will have a 4.74 percent share. Meanwhile, two China-based companies _ China Life Insurance Co. and State Grid Corp. _ will each get 20 percent stakes, while Beijing-based CITIC Trust will hold a 12.85 percent share and Yangpu Puhua will get 8 percent.

GDB, which is owned by the provincial government and has more than 500 branches and about $48 billion in assets, is based in the fast-growing industrial province that abuts Hong Kong.

Citigroup had been fighting since last year to buy the Chinese bank and the announcement of the deal signals that it will be able to greatly expand its operations in China. Citigroup currently has branches in just six Chinese cities.

It bested a competing bid from a consortium led by France's Societe Generale AG.

A signing ceremony was held in Guangzhou, the capital of Guangdong province.

Citigroup said in a statement issued in New York that"this transaction represents the first time a major international financial services company, leading a consortium of co-investors, has been permitted to obtain substantial ownership and assume a significant management role in a Chinese financial institution."

William Rhodes, a senior vice chairman of Citigroup, called it"a tremendous opportunity."Robert Morse, chief executive of Corporate&Investment Banking for Asia Pacific, called it"a positive outcome for all stakeholders involved, including the Guangdong Government, GDB's management, employees, customers, shareholders and the new investors."

Its shares rose 5 cent to $50.52 in midday trading on the New York Stock Exchange.

As Beijing gradually opens its banking industry to foreign competition, Chinese banks have sought out international lenders as strategic investors to draw in both money and management skills.

The agreement _ which is still subject to regulatory approval _ allows Citigroup to work with GDB on a daily basis to enhance its management team and corporate governance standards, improve operational and lending practices, upgrade the bank's information technology and further develop customer service.

GDB has some 12 million consumer customers, 9 million cardholders and more than 12,00 employees.

Citigroup Corporate and Investment Banking was the financial adviser to Citigroup for the transaction.

Citigroup has some 200 million customer accounts in more than 100 countries worldwide.

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