LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)

June 21, 2005 Tuesday
London Edition 1

SECTION: COMPANIES ASIA-PACIFIC; Pg. 29

LENGTH: 403 words

HEADLINE: UBS in talks to buy Bank of China stake BANKING:

BYLINE: By FRANCESCO GUERRERA

DATELINE: HONG KONG

BODY:


UBS is in talks to buy a multi-million dollar stake in Bank of China, the country's third-largest lender, in a move that could increase the Swiss group's chances of winning a coveted advisory mandate for BoC's USDollars 3bn-USDollars 4bn overseas listing.

UBS and other foreign rivals will today begin "pitching" to win a role on one of Asia's highest-profile deals of the past few years.

News of the Swiss bank's talks with BoC come weeks after Citigroup was stripped of its underwriting mandate on the USDollars 5bn listing of China Construction Bank amid accusations it had reneged on a pledge to become an investor.

The US group was believed to have offered to buy a large stake in CCB last year just before beating fierce competition to become one of the advisers on its overseas initial public offering. The CCB stake went to Bank of America, which last week agreed to pay USDollars 3bn for a 9 per cent holding. Citigroup's problems highlight the competition and risks faced by international financial groups in striking deals with China's troubled "Big Four" state banks.

Global banks, including Deutsche Bank and JPMorgan, have been reportedly looking to buy stakes in large Chinese lenders ahead of overseas listings. UBS declined to comment. However, people close to the situation stressed that any decision to buy a stake in BoC would not be linked to the underwriting mandate.

They said BoC's IPO, likely to take place next year, would generate fees of USDollars 140m to be shared among at least three underwriters, while a stake would cost more than that.

Analysts said UBS would have to decide whether a stake in BoC, which would help it to tap into China's fast-growing market for financial services, was a sound investment on its own merits. Unlike Citigroup, UBS had not offered to become an "anchor investor" in BoC because of the presence of Royal Bank of Scotland, according to people close to the situation.

RBS is believed to have been in talks to buy a stake that could be worth more than USDollars 1bn in BoC and its involvement would limit other investors to smaller holdings.

Although a stake purchase would increase UBS's chances of winning the underwriting mandate, the Swiss bank is already considered a favourite because of its long-standing links to the Chinese lender. Goldman Sachs and Bank of China International, BoC's investment banking arm, are the other banks tipped to land advisory roles.

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