Chinese bank to buy stake in U.S. bank
shanghai -- China Minsheng Banking Corp. said Monday that it had agreed to buy a 9.9% stake in UCBH Holdings Inc. of San Francisco in what would be the first U.S. strategic investment by a mainland Chinese bank.
UCBH, the parent of United Commercial Bank, called the deal “historically significant.”
Analysts said the move by Beijing-based Minsheng was likely to be a harbinger. Corporate China is aiming to expand its reach globally in a bid to build brands, acquire management talent and tap new markets. The Chinese “government can’t wait to have more companies invest overseas,” said Qiu Zhicheng, an analyst with Haitong Securities in Shanghai.
UCBH has been looking to do the same in China, agreeing this year to buy Shanghai-based Business Development Bank Ltd. for $205 million.
That purchase is expected to close in the fourth quarter. UCBH said the Minsheng deal -- which requires the approval of U.S. regulators -- would “fully satisfy the equity funding needs for UCBH’s pending acquisition in China.”
Thomas S. Wu, chairman and chief executive of UCBH, said the partnership with Minsheng would also create significant competitive advantages for both institutions. “This alliance will enable customers of both Minsheng and UCBH to conduct business with a broader scope of products and services more conveniently and efficiently,” he said.
UCBH’s main rivals among institutions catering to Asian Americans, East West Bancorp Inc. and Cathay General Bancorp, both based in Southern California, could feel pressure to increase their business connections with China.
United Commercial was founded in 1974 as United Federal Savings & Loan Assn. to serve San Francisco’s Chinese community. It has assets of more than $10 billion and branches and offices across California as well as in New England, New York, Georgia, the Pacific Northwest, Texas, China and Taiwan.
Minsheng -- whose shares are held mainly by non-state-owned entities -- has $111.9 billion in assets, a market capitalization of $30.1 billion, 298 branches and 1,370 ATMs in China, according to UCBH.
Founded in 1996 and said to be China’s seventh-largest bank by market value, Minsheng has made clear its ambitions to expand outside its country.
“It has emphasized its globalization strategy many times,” said Qiu, the banking analyst, adding that the strategy might prove shortsighted. “I think Minsheng still has a large room to develop in the domestic market, and such acquisition will increase its costs and difficulty in managing the bank.”
For China, Minsheng’s UCBH deal would represent a reversal of the flow of investments. In recent years, U.S. and other foreign banks have tried to get footholds in China’s potentially lucrative financial services industry. Bank of America and Citibank, among others, have acquired stakes in large Chinese banks. Beijing has opened its financial services industry to foreign firms, though it has restricted foreigners’ investments to 25% of a Chinese banking company.
In the U.S., the outward push by cash-rich China, especially in its campaign to acquire natural resources and technology, has triggered concern and political resistance. Two years ago, a Chinese oil and natural gas company, CNOOC Ltd., withdrew its bid to buy Unocal Corp. after it provoked intense criticism from some members of Congress, among others.
Under the terms of the deal, Minsheng would acquire its stake in two phases, first purchasing 5.4 million new UCBH shares at $17.79 each -- a discount to Monday’s closing price of $19.36.
The first phase would take place in the current quarter. In the second phase, next year, Minsheng would pay between $115 million and $172 million through another share placement, a purchase of public market shares or both, UCBH said.
