Chinese cash fuels Barclays bid
Barclays is attempting to raise enough finance to take over
ABN
The Chinese and Singapore governments have become key investors in
Barclays, helping the UK firm to raise its offer for the Dutch bank
ABN Amro.
The China Development Bank (CDB) and Temasek, the investment arm of
the Singaporean government, have invested £2.4bn (3.6bn euros) in
Barclays.
And they will invest a further £6.5bn if the ABN takeover goes
through.
Barclays has said it will now pay 67.5bn euros (£45.4bn) in cash
and shares for the Dutch bank.
Business opportunity
A group led by Royal Bank of Scotland (RBS) is also vying for ABN
and its current offer is higher than Barclays' revised bid.
Barclays shares climbed 2% higher on Monday after details of the
Asian tie-ups emerged.
The deal shows the enthusiasm of western institutions to tap into
the huge Chinese market
Robert Peston
BBC Business Editor
Read Robert Peston's blog
The BBC's Business Editor Robert Peston revealed on Sunday that the
Asian deals were being negotiated.
He said that Barclays would be hoping that its new relationship
with the CDB would yield it hundreds of millions of pounds in extra
profits from doing new business in the Chinese economy.
If Barclays acquires ABN, the Chinese state would emerge with a
shareholding of 7.7% in the enlarged group.
It has pledged not to raise its stake to more then 9.9% of the
group over the next three years.
A smaller stake of about 3% would be taken by Temasek - which is
owned by the Singapore government but says all investment decisions
are made independently.
The company, whose chief executive is the wife of Singapore's prime
minister, has about $80bn under management.
CDB is state-owned, though is seen by analysts as one of the
country's most commercial institutions, financing industries
including petrochemicals and railways.
The latest instalment in this major banking tug of war has yet
again thrown into doubt the identity of the eventual winner
Richard Hunter, Hargreaves Lansdown
See Barclays shares
Barclays chief executive John Varley said that he was "entirely
comfortable" with the involvement of the Chinese in the
business.
"This is the biggest external investment they have made and they
have chosen Barclays," he said. "There should be a significant and
positive reaction in global markets."
Potential controversy
The Asian deals were arranged by the leading US private equity
house, Blackstone - which recently sold a £1.5bn stake in itself to
the Chinese state.
The Chinese state has $1.2 trillion of foreign exchange reserves to
invest, much of which has been placed in US Treasuries or
government bonds.
China recently signalled it would be taking a more imaginative and
aggressive approach to how it invests its war chest, including
buying significant holdings in overseas companies.
Beijing ending up with an influential stake in such an important
European financial institution as the merged Barclays/ABN may prove
controversial, Mr Peston added.
"When the initial excitement has died down, there will be some
politicians and business people who will wonder whether when China
buys abroad on this scale, the balance of economic power may be
shifting eastward in a way that should concern us," he said.
RBS remained favourite to win the battle for ABN Amro because its
offer was higher and had a greater cash element said Richard
Hunter, head of UK equities at Hargreaves Lansdown
Stockbrokers.
But he added: "The latest instalment in this major banking tug of
war has yet again thrown into doubt the identity of the eventual
winner."
http://news.bbc.co.uk/2/hi/business/6911305.stm
