The Carlyle Group has pulled out of a race for China’s Guangdong Development Bank because the stake it would get would be too small for the buyout group, according to a source familiar with the auction.
Associates First Capital, wholly-owned by Citigroup, has replaced Carlyle in the consortium made up of several Chinese companies including China Life Insurance, according to Dow Jones Newswires citing people familiar with the matter. Carlyle declined to comment.
Carlyle is, however, persisting with its acquisition of an 85 percent stake in Xugong Construction Machinery Co for $375 million, the source said. The US buyout group is still awaiting regulatory approval which almost a year after it signed a deal with Xugong is looking ever more remote, sources said.
The Citigroup consortium is bidding for an 85 percent stake in the bank. Under Chinese laws, any single foreign investor is entitled to a maximum of a 20 percent stake in a Chinese bank, while the total combined stake allowed for foreign investors in a Chinese bank is 25 percent.
Now Citigroup is competing with Société Générale-led consortium to get as large a stake as they can possibly, the source said. It also faces competition from China’s Ping An Insurance. The French bank’s consortium includes Caisse de Depot et Placement du Quebec, Canadian pension fund, and heavyweight Chinese business groups such as Baosteel and Sinopec.
Citigroup consortium was reported to have won the long-running race with a $3 billion bid in mid-September, but that has since been refuted. China Banking Regulatory Commission Chairman Liu Mingkang said last Sunday that the Chinese government hasn’t yet made a decision on the sale. The bid for China’s 11th largest lender bank, which has gone on for more than a year, is expected to be finalised soon.