TPG Capital LLP and Kohlberg Kravis Roberts & Co (KKR) are in final talks to buy Morgan Stanley’s stake in China International Capital Corp (CICC, 中國國際金融), the first Sino-foreign investment bank, for more than US$1 billion, sources said.
The US private equity firms plan to equally split Morgan Stanley’s 34.3 percent holding in CICC, the people said, asking not to be identified because the talks are confidential. Bain Capital LLC lost out in bidding for the stake after offering less than US$1 billion, one source said.
Selling the stake will allow Morgan Stanley to build its own investment bank in China after being a shareholder in CICC for a decade without having management control. This is the bank’s second attempt to dispose of the stake, after talks with buyout firms fell apart in early 2008 on disagreements about price. New York-based Morgan Stanley invested US$35 million in CICC when it was established in 1995.
“It’s a good profit and Morgan Stanley has been seeking to build its own platform as they can’t exert influence on CICC,” said Liang Jing, an analyst at Guotai Junan Securities Co (國泰君安證券). “For the buyout funds, it’s nice choice of investment if you don’t mind being a passive investor.”
Morgan Stanley ceded management control in 2000 and CICC is now run by Levin Zhu (朱雲), the son of former Chinese premier Zhu Rongji (朱鎔基).
The Chinese government allowed Morgan Stanley to invest in CICC in return for the expertise required to build China’s first investment bank. Elaine La Roche, the last Morgan Stanley-appointed head of CICC, stepped down in June 2000. The partners bickered about compensation, management and strategy and that lack of consensus worked against both firms, she said in a 2005 interview.
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