Chinese regulator backs ICBC's deal with Standard

By Scott McDonald - Business Report – 04/02/2008

Industrial and Commercial Bank of China (ICBC) had received regulatory approval to buy a 20 percent stake in Standard Bank in a deal that is the latest big-ticket overseas expansion by Chinese investors, China's biggest bank said yesterday.

The deal between state-owned ICBC and Standard Bank, estimated at about $5.4 billion (R39 billion), is one of China's biggest foreign corporate acquisitions.

"The Chinese banking regulatory commission has approved the plan," said the bank.

"The deal has already been approved by shareholders of both banks, along with regulators in South Africa."

Erik Larsen, Standard Bank's media relations manager, said: "The approval did not come as a surprise as we've been hearing for a while that approval from the Chinese authorities was imminent.

"But we are not in a position to confirm it yet,'' added Larsen. The deal was still on track for final approval on February 12.

The tie-up between ICBC and Standard Bank comes amid a push by communist leaders for China's companies to expand abroad to diversify the country's economy.

Efforts have focused on developing ties with Africa as a potential source of energy, raw materials and markets for the Asian powerhouse's booming economy. China's state-owned banks are growing rapidly amid an export-fuelled economic boom, and are expanding in foreign countries to serve Chinese clients in foreign markets and to win international business.

The Chinese bank's decision to take a minority stake in Standard Bank, instead of acquiring a bank outright, was in line with a Chinese strategy of trying to avoid possible political frictions over buying assets in foreign countries.

Chinese companies have been skittish about acquisitions since the uproar in 2005 over state-owned oil company Cnooc's attempt to buy US oil and gas producer Unocal.

Cnooc dropped its bid after US critics said it might endanger energy security.

ICBC is flush with cash to pay for foreign expansion after the company raised a record-setting $21.9 billion in an initial public stock offering in October 2006. The bank says it has $153 billion in assets and reported profit in 2006 of $6.8 billion.

Standard Bank operates in 38 countries and 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 firms invested $21 billion abroad in 2006, according to the government.