Report: TPG, KKR eye Morgan Stanley's CICC stake

The China Securities Regulatory Commission has approved the proposed sale of Morgan Stanley's 34.3% holding in China International Capital Corporation.

China’s regulatory authorities have approved the proposal for Morgan Stanley to sell its 34.3 percent stake in China International Capital Corporation (CICC), paving the way for a potential sale to suitors which reportedly include private equity firms TPG Capital and Kohlberg Kravis Roberts.

Citing a report by China’s state-owned Securities Times, a Reuters report said that in addition to TPG and KKR, the two other bidders were “an existing foreign shareholder of CICC and a foreign insurance company”. The deal is valued at more than $1 billion.

The China Securities Regulatory Commission approved the change of hands this week, and although the regulator did not specify who the potential seller was, a CICC spokeswoman told Reuters that they did “not deny it has to do with Morgan Stanley”.

TPG declined to comment. Morgan Stanley, KKR and CICC did not comment by press time.

Chinese legislation forbids foreign companies from having more than one joint venture at a time in the country.  A successful exit would allow Morgan Stanley to pursue a separate venture with mid-sized brokerage China Fortune Securities, an endeavour the US brokerage has been wanting to pursue since 2007, reports said.

Morgan Stanley co-founded CICC alongside state-backed investment company China Jianyin Investment, state institution China National Investment & Guaranty, Singaporean SWF GIC and Chinese conglomerate Mingly Corporation. It acquired its stake for $37 million in 1995.

In November 2009, an industry source speaking to PEI Asia named Bain Capital and General Atlantic among the investors looking to acquire Morgan Stanley’s stake in CICC. It was reported several months later that TPG and KKR had also put their names in the hat for Morgan Stanley’s stake.

Morgan Stanley had first attempted to exit its stake in CICC in 2007, but shelved its plans due to the onset of the global recession.