IBM joins Citigroup consortium to bid for stake in Chinese bank

Mumbai: International Business Machines' (IBM) financial arm will join a consortium led by Citigroup to bid $3 billion for an 85-per cent stake in China's Guangdong Development Bank, market sources said. IBM Global Financing will take a stake of up to five-per cent stake in the troubled southern Chinese lender if the Citigroup bid was successful, the sources said.

The consortium includes top life insurer China Life Insurance Co of Hong Kong. Citigroup and its wholly-owned Associates First Capital would take a combined stake between 20 and 21 per cent - above the 20-per cent limit imposed on individual foreign stakes in Chinese banks and slightly larger than that of China Life - to become GDB's largest individual shareholder, sources involved with the bid said.

GDB is IBM's top client, receiving supplies of more than 80-per cent of the bank's IT systems and devices, industry sources said. A final agreement between the consortium members is expected to be signed this week, the banker said.

Citigroup last year won preliminary approval to acquire over 20 per cent stake in GDB, but that arrangement was later rejected by regulators. The bid was reopened with France's Societe Generale joining the fray. Citigroup and Societe Generale have been locked in a takeover battle for more than a year, with the sources saying both sides are bidding about $3 billion for 85 per cent of GDB.

China, which is set to open its banking sector fully to foreign competition under WTO obligations next month, has attracted nearly $21 billion in financial services industry investments since 2001.

Citigroup and Societe Generale are attracted to GDB's more than 500 branches, rather than the lender's weak financial shape.

Citigroup is also in talks to increase its stake in Shanghai Pudong Development Bank to 20 per cent from less than 5 per cent, and stakes in both banks would give the firm a footprint in two of China's richest markets.