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Financial Times (London, England)

August 27, 2005 Saturday
London Edition 3

SECTION: FRONT PAGE - COMPANIES & MARKETS; Pg. 1

LENGTH: 447 words

HEADLINE: Goldman wins job to advise BoC on its overseas listing

BYLINE: By FRANCESCO GUERRERA

DATELINE: HONG KONG

BODY:


Goldman Sachs has won a highly coveted mandate to advise Bank of China on its Dollars 3bn-Dollars 4bn (Pounds 1.7bn-Pounds 2.2bn) overseas listing in spite of strong pressure from Merrill Lynch, which last week agreed to invest about Dollars 700m in China's third-biggest lender.

UBS, which is in advanced talks to buy a stake worth up to Dollars 500m in BoC, is expected to be named alongside Goldman Sachs to manage the initial public offering in Hong Kong, raising the possibility that Merrill Lynch may miss out on the deal.

BoC's move, which has not yet been announced, is a boost for Goldman Sachs, which had been accused by rivals of a conflict of interest after opening talks over a Dollars 1bn stake in Industrial and Commercial Bank of China, another of the "big four" state lenders.

Merrill Lynch's failure to be named as an adviser would interrupt a trend that has seen the purchase of stakes in Chinese lenders by foreign investment banks regularly followed by equity mandates. Investment firms insist that their decisions to buy stakes are not linked to whether they win IPO work.

However, Merrill Lynch's fate could influence rivals such as Credit Suisse First Boston, which has offered to become a shareholder in China Construction Bank, the country's second larg est, while lobbying to arrange its Dollars 5bn listing.

People close to the situation said that although Goldman Sachs had received a verbal reassurance from BoC over its role in the IPO, scheduled for next year, no formal mandates had yet been awarded.

That means that Merrill Lynch, which participated in the Dollars 3.1bn purchase of a 10 per cent stake by a consortium led by Royal Bank of Scotland, is still in the running for an IPO mandate.

Merrill, which has so far failed to land a large Chinese banking IPO, declined to comment yesterday. However, people close to BoC said the bank was lobbying hard to be included on the deal, which could generate total advisory fees of more than Dollars 100m.

Goldman Sachs and UBS had been seen as favourites to advise BoC on the IPO given their long-standing relations with the Chinese bank. Goldman Sachs, in particular, is believed to be close to Xiao Gang, BoC's powerful chairman. However, Merrill Lynch's investment was believed to have put it in a leading position to win an advisory mandate.

Goldman Sachs is believed to have argued that its interest in ICBC was not a conflict of interest because the stake would be bought by its private equity arm. With ICBC, China's largest bank, unlikely to list before 2007, the potential for a conflict was also reduced, the US bank is believed to have told BoC.

Goldman Sachs, UBS and BoC declined to comment yesterday.

LOAD-DATE: August 26, 2005