The Wall Street Journal-20080204-China-s ICBC To Buy Stake In African Firm

Return to: The_Wall_Street_Journal-20080204

China's ICBC To Buy Stake In African Firm

Full Text (309  words)

Associated Press

BEIJING -- Industrial & Commercial Bank of China Ltd. said yesterday that it received approval to buy a 20% stake in South Africa's biggest lender, for more than $5 billion.

The deal between state-owned ICBC -- China's biggest bank by assets and market capitalization -- and Standard Bank Group Ltd. is one of China's biggest foreign-corporate purchases to date.

ICBC, in a statement on its Web site, didn't give financial details of the deal announced last year, but the official Xinhua news agency said it was valued at $5.46 billion.

The move comes amid a push by China for its companies to expand abroad to diversify the economy. Efforts have focused on developing ties with Africa as a potential source of energy, raw materials and markets for China's booming economy.

ICBC's decision to take a minority stake in the South African bank instead of acquiring it outright was in line with a Chinese strategy of trying to avoid possible political frictions over buying assets abroad.

Chinese companies have been skittish about acquisitions since the uproar in 2005 over state-owned oil company Cnooc Ltd.'s attempt to buy U.S. oil and gas producer Unocal Corp. Cnooc dropped its bid after American critics said it might endanger energy security.

ICBC is flush with cash to pay for foreign expansion after raising a record $21.9 billion in an initial public stock offering in October 2006.

ICBC said it has 1.1 trillion yuan ($153.1 billion) in assets, and it reported profit for 2006 of 49.3 billion yuan.

Standard Bank, based in Johannesburg, operates in 38 countries and says it has assets of $119 billion.

Beijing is encouraging Chinese companies to invest abroad in what it calls a "go global" strategy to diversify the economy and take advantage of international opportunities.

Chinese companies invested $21 billion abroad in 2006, according to the government.