China's Shenzhen Development Bank Co says its board has agreed to sell an 18 percent stake to US private equity firm Newbridge Capital Ltd in a rare deal giving effective control of a state-owned Chinese bank to a foreign company.
A notice by the bank, published in the state-owned China Securities Journal yesterday, said negotiations on the long-awaited deal were concluded over the weekend.
Four government entities in Shenzhen, a boomtown bordering Hong Kong, are to transfer their stakes to Newbridge, giving it a 17.89 percent stake, the notice said. It did not give financial terms for the deal, which requires approval by banking regulators.
A final agreement is to be signed soon, the notice said.
Newbridge's purchase is the first acquisition of a controlling stake in a state-owned local bank by a foreign company. Last fall, French bank BNP Paribas acquired China's first wholly foreign-owned bank. But that involved buying out its Chinese partner's share in a joint venture bank.
Shenzhen has been leading reforms aimed at reducing government ownership in state-owned enterprises.
The deal with Newbridge fits that strategy. It also is part of an effort to bring foreign involvement into banking management to help modernize a state-owned banking industry that lags decades behind its foreign competitors.
Newbridge, an affiliate of major American private equity firm Texas Pacific Group, began talks with Shenzhen in September 2002. But the deal ran into trouble when Newbridge accused the Chinese side of breaking its agreement and trying to sell their shares to a Taiwanese company, Chinatrust Financial Holding Co (
Foreign financial institutions have been rushing to acquire strategic holdings in China's banks ahead of the full opening of the banking sector to foreign competition in 2006.
In March, China Minsheng Banking Corp, the country's first privately held bank, announced plans to sell a 4.8 percent stake to Newbridge. Newbridge also has a stake in Korea First Bank and in Japan Telecom Co.
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