Singapore's Temasek to buy into China bank

Singapore's Temasek to buy into China bank
China Daily


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Singapore's Temasek to buy into China bank
(Agencies)
Updated: 2005-07-05 12:50

Singapore state investment agency Temasek Holdings Pte. Ltd. has agreed to take a stake in China Construction Bank, the country's third-largest lender said, partly confirming earlier media reports.

A Temasek unit would buy an unstated number of shares in the bank, China's top property lender, from a state holding company and also invest $1 billion during the bank's planned international listing, China Construction Bank said.


A branch of the China Construction Bank in Shanghai in this picture taken on May 16, 2005. [newsphoto]
A source close to the deal said last Tuesday that Temasek had agreed informally to pay $1.4 billion for a 5.1 percent stake in the bank, confirming a report in last week's edition of Caijing magazine.

Caijing had also reported the planned $1 billion investment when the bank listed.

The deal is the biggest single overseas investment for Temasek, which controls businesses including Southeast Asia's biggest phone company, Singapore Telecommunications Ltd., and the region's biggest bank by assets, DBS Group Holdings Ltd.

The government investment agency, which acts like a fund manager for the city-state, has been on the prowl for regional assets over the last two years and has been making strides to diversify its portfolio geographically, venturing into markets ranging from South Korea to Pakistan and, recently, Russia.

About 57 percent of its estimated $54 billion investment portfolio is in telecoms, media and financial services, with about 7 percent in energy and resources, according to its 2004 annual report.

The bank said a wholly owned subsidiary of Temasek would purchase "certain existing shares" from the central bank's investment arm, Central Huijin Investment Co., subject to regulatory approvals.

The Temasek unit, Asia Financial Holdings Pte. Ltd., would also "invest $1 billion at the IPO price" during the bank's planned international listing, the bank said in a statement issued late on Monday.

It said a definitive agreement had been signed on Friday.

The stake sale to Temasek would be the second for China Construction Bank to a foreign investor in recent weeks and marks an important step in China's efforts to reform its backward and debt-ridden financial sector.

Last month, Bank of America Corp. said it would pay $3 billion for 9 percent of China Construction Bank, which had been in talks with potential foreign investors for months, ahead of a listing expected late this year or in 2006.

China Construction Bank and Bank of China were chosen to pilot banking sector reforms and given $22.5 billion each in state funds in late 2003 to help shore up their balance sheets and kickstart reform efforts.

Finding foreign strategic investors, who can theoretically help China's sprawling state banks absorb international best practices in areas like corporate governance, has been widely seen as a prerequisite to their listing efforts.

Bank of China is yet to announce any deals with foreign strategic investors following well over a year of talks with potential partners.

Sources familiar with the situation have said CCB will file a formal IPO application with the Hong Kong stock exchange in August, at the earliest. It is widely expected to raise some $5 billion in its initial public offering.