TPG, KKR, GIC to spend $1bn on Chinese bank stake

Morgan Stanley's sale of its 34.3 percent stake in China International Capital Corporation will generate a pre-tax gain of roughly $700m.

Global private equity heavyweights Kohlberg Kravis Roberts (KKR) and TPG Capital have teamed with the Government of Singapore Investment Corporation (GIC) and Singaporean insurer Great Eastern Life to purchase Morgan Stanley's 34.3 percent stake in China International Capital Corporation (CICC).

Financial terms were not disclosed, but media reports suggested the transaction would be valued at $1 billion. Morgan Stanley said in a statement it would record a pre-tax gain on the sale of approximately $700 million.

While TPG and KKR are acquiring 10.3 percent and 10 percent in the Chinese bank respectively, GIC and Great Eastern will buy the remaining 9 percent and 5 percent each, a source told PEI Asia.

Following the transaction, the Singaporean sovereign wealth fund will become the second largest shareholder of CICC, increasing its interest in the bank to 16.35 percent from 7.35 percent, according to a spokeswoman for GIC.
“The introduction of some of the most prominent international institutional investors will help CICC in its future business development and international expansion,” Li Jiange, chairman of CICC, said in a joint statement from the buyers.

Morgan Stanley co-founded CICC alongside GIC, China Construction Bank, state-backed investment company China Jianyin Investment, state institution China National Investment & Guaranty 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 interested in Morgan Stanley's CICC stake.

The stake sale will pave the way for the US brokerage to pursue a joint venture with mid-sized brokerage China Fortune Securities, an endeavour Morgan Stanley has reportedly been keen to do since 2007, when it first attempted to sell its stake in CICC. Chinese legislation forbids foreign companies from having more than one joint venture at a time in the country.

More recently, Morgan Stanley signed a memorandum of understanding with the Hangzhou Municipal government to launch an RMB-denominated fund as well as establishing its headquarters for Chinese private equity investment in the city.