Banking News
- GE's deal fails due to price: bankers
Date: 26-Oct-2007 Sources: (Shenzhen Daily)
GENERAL Electric Co.'s two-year-long effort to buy a stake in Shenzhen Development Bank failed mainly because many Chinese shareholders believed the planned purchase price was too low, bankers said Wednesday.
The bank said Tuesday that it decided to end a 2005 stock sale pact with GE because they could not reach final agreement on certain conditions, which it did not specify in a statement.
'Price is one of those conditions,'a Shenzhen Development Bank spokeswoman said.
In 2005, GE announced that it agreed to pay US$100 million for a 7.3 percent stake in Shenzhen Development Bank, in which U.S. private equity firm Newbridge Capital, the bank's biggest shareholder, already holds a nearly 18 percent stake.
GE had expected Shenzhen Development Bank to sell shares in a private placement exclusively to the U.S. company at 5.24 yuan (US$0.699) apiece in 2005. By Wednesday's close, the bank's Shenzhen-listed share price had risen to 41.8 yuan.
Officials at both GE and Shenzhen Development Bank lobbied Chinese regulators heavily over the past two years for approval of the deal but ultimately found they would also be unlikely to win shareholders' support, said bankers familar with the situation.
'How many Shenzhen Development Bank shares can GE buy for US$100 million based on the current market price??said one of the bankers.
'You can't imagine that people would allow you to buy something that is actually worth 40 yuan for just 5 yuan.'
Other bankers said the Chinese banking regulator had become more cautious about foreign investments in the country's financial sector amid increasing domestic concern over whether Chinese assets were being sold to foreign investors too cheaply.
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