Citi Won Guangdong Development Bank Stake
Citigroup announced today that it won a $3.1 billion bid to take control of Guangdong Development Bank, a regional bank with more than 500 branches in south and east China. A consortium led by Citigroup, also including IBM, China Life Insurance, China’s State Grid Corp, CITIC Trust, and PuHua Investment, will take 85.6% percent of the Guangdong bank. According to a statement released by GDB, Citigroup will actively involve in “eight areas including risk management, corporate governance, asset and debt management, human resources and financial innovation”.
While this is definitely a good news for Citigroup which saw rivals such Bank of America, American Express, Royal Bank of Scotland, HSBC, and Goldman Sachs making billions of dollars from Chinese bank deals, what worries me is its partner in the deal, China Life Insurance (LFC). Before Citi’s announcement, LFC was halted in Hongkong last night and there was no trading of LFC in NYSE today with no explanations. A message on Yahoo Message Board says
At the request of China Life Insurance Company Limited (the “Company”), trading in its H shares has been suspended with effect from 10:50 a.m. today (16/11/2006) pending the release of the announcement in relation to a possible discloseable transaction which is a price sensitive information of the Company.
From past experience, when a stock is halted, it usually signals something bad is happening. I am not sure if this is the case for LFC as being part of the deal will definitely boost profits at LFC once GDB gets back in shape with Citigroup in charge. Let’s what happens tonight in Hongkong to get a clue how LFC will react to the news tomorrow.
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