China Construction Bank (CCB, SHSE: 601939, and SEHK: 0939), the biggest real estate and mortgage lender in the Chinese mainland, will control a 72 percent stake in Brazil-based Banco Industrial e Commercial S.A. (BIC).
It said in the evening on November 1 that it had signed a share purchase agreement with the controlling shareholder of BIC and under terms of the agreement, it would acquire about 157.39 million ordinary shares and approximately 24.7 million preferred shares of the latter for about BRL 1.6 billion, or BRL 8.79 each. The deal would be subject to concerned authorities and provided that everything went on well, it would own a 72 percent stake in the target. The figure would rise to 73.96 percent if the treasury shares were deducted from the total capital stock. The consideration was fixed on the base of net assets of the target as at the end of March this year and after the deal, it would launch a tender offer in accordance with concerned rules by the Brazilian securities watchdog, an effort to control a 100 percent stake in the target. And upon the completion, the target would delist from the stock market.
Available information shows that established in 1938, BIC is one of the time-honored private banks in Brazil and mainly focuses on providing loans to medium-sized firms locally. It has about 900 employees in 38 outlets in 33 major cities in Brazil as well as a branch in the Cayman Island. And in 2007, it debuted on the stock market and saw total credit assets hit BRL 13.6 billion as at the end of this June. Its share price reached a record high of BRL 17 in 2010, but dropped to BRL 3.5 in mid this year. However, the share price had increased by 127 percent to BRL 7.5 since the start of this August.
Leading global credit rating agency Moody’s said in July this year that BIC was under rising pressure from both profitability and asset quality due to impact delivered by credit losses rooted from several consecutive quarters of non-performing loans. As for this, CCB pointed out that Brazil was always a major strategic market for it to launch mergers and acquisitions (M&As) overseas and it had been looking for opportunities to enter the market for a long period of time. And if the deal won a nod from the authorities successfully, it would be an easier job for it to fuel expansion in the Latin American market in the future.
CCB rose 0.32 percent to close at CNY 4.32 on the Shanghai bourse on November 1.
