(Updates with Standard Bank comment in 14th paragraph.)
Aug. 5 (Bloomberg) -- Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, agreed to pay $600 million for some assets controlled by Standard Bank Group Ltd. in Argentina in its biggest takeover in more than three years.
The Chinese bank will pay cash for an 80 percent stake in Standard Bank Argentina, Standard Investments and Inversora Diagonal, according to a statement to the Hong Kong stock exchange today. The Beijing-based lender and Standard Bank London Holdings Plc also plan to jointly invest $100 million in Standard Bank Argentina after the transaction is completed.
The acquisition extends ICBC’s global expansion to South America’s second-largest economy, adding to plans announced this year to open a bank in Brazil and buy a U.S. lender. ICBC, which aims to be the first Chinese lender to operate in Argentina, would gain 103 branches in a nation whose second-largest trading partner is the Asian country.
“ICBC’s expansion overseas is in line with the broader trend of Chinese companies tapping into the international market,” Grace Wu, head of Hong Kong and China banking research at Daiwa Capital Markets Hong Kong Ltd., said by telephone today. “ICBC may have more acquisitions in Latin America and Asia.”
Shares of ICBC fell 3.2 percent to HK$5.46 at the close of Hong Kong trading amid a global equity rout. The stock has lost almost 6 percent this year.
The Chinese bank, which acquired a 20 percent stake in Johannesburg-based Standard Bank for about $5.4 billion in March 2008, is the largest shareholder in Africa’s biggest lender. Standard Bank dropped 2 percent to 91.69 rand as of 10:37 a.m. in Johannesburg.
The sale of the Argentina unit underscores Standard Bank’s reversal in strategy to focus on the African continent, where it has operations in 17 countries. The lender sold its stake in Russia’s Troika Dialog investment bank earlier this year and plans to use the $372 million in proceeds to make acquisitions in Africa to benefit from increased trade and investment banking transactions with emerging markets.
ICBC has announced takeovers and investments valued at a combined $2.1 billion since the beginning of 2008, including spending $1.4 billion to increase its stake in its Hong Kong unit about a year ago, according to data compiled by Bloomberg.
Investment in Americas
The Chinese lender said in January that it agreed to buy an 80 percent stake in Bank of East Asia Ltd.’s U.S. operations for $140 million. The transaction, which would give it a commercial banking license in the world’s largest economy as well as a retail banking network, is awaiting regulatory approval.
ICBC’s assets in the Americas have jumped 5.5 times to $6.59 billion at the end of last year from $1.01 billion a year earlier, according to its annual report.
Standard Bank Argentina, which has been in operation since 1917, gives ICBC 103 branches in the nation, according to the statement. ICBC had 16,227 outlets on the Chinese mainland and 203 overseas at the end of last year. The companies expect to complete the transaction in the first half of next year, Standard Bank said in a statement.
Expanding into South America “is an important component in the bank’s globalization strategy,” ICBC, which was advised by Credit Suisse Group AG on the deal, said in its statement today. Argentina is “one of the key focus markets for the bank’s phased expansion in South America.”
Standard Bank, which has had operations in Argentina for 12 years, took control of Bank of America Corp.’s BankBoston Argentina unit in its first purchase of a retail bank outside Africa in April 2007 as it sought to reduce dependence on its home market. The acquired business, with about $2 billion in assets and 89 branches, was Argentina’s seventh-largest lender at that time.
Standard Bank said it will generate about $380 million from the sale of most of its stake in the bank to ICBC after accounting for transaction costs and investing $20 million in the unit. The profit on selling the Argentina assets would be about $217 million, it said.
The African lender is also keeping a 20 percent stake in each of the target companies, which it can require ICBC to buy between the second anniversary of the closing date and the seventh, according to the statement.
While Standard Bank calls Africa the “core” of its business, profit before one-time items from the region, excluding South Africa, fell 38 percent last year. On Oct. 21, the lender announced it would cut as many as 2,100 jobs in London and Johannesburg to reduce expenses.
--With assistance from Jacob Greber in Sydney and Renee Bonorchis in Johannesburg. Editors: Chitra Somayaji, Russell Ward
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