Shinhan Financial Group has announced its bid for LG Card, the country’s second credit card issuer. The deal is expected to be the biggest ever South Korean takeover and will allow Shinhan to compete with the country’s leader, Kookmin Bank.
Shinhan, which already owns more than 7% of LG Card, offered Won68,000 ($71.5) per share for an 85.7% stake in the company. If it receives all regulatory approvals, the deal might overshadow Kookmin Bank’s Won6950bn acquisition of Korea Exchange Bank in March this year.
Shinhan’s card business combined with LG Card will reportedly make it one of the world’s top five credit card companies by transaction volume by 2015. The merged business will have almost a quarter of the local credit card market. The acquisition will also give Shinhan the ability to cross-sell services such as insurance and private banking to LG’s customers.
The acquisition is the latest example of the banking sector consolidation taking place in the country. Mergers and acquisitions among local banks have been used as a strategy to compete with international players, which are able to offer products and services at lower prices.
On its side, Kookmin Bank, the country’s biggest and the world’s 51st bank by Tier 1 capital, was reported to be pushing ahead with plans to take over one or more banks in emerging markets, including China and Vietnam. New urgency is being put on the bank’s expansion plans by the near saturation of the local market and the tight competition with foreign banks.
Shinhan plans to fund the acquisition through the sale of Won3000bn-worth of corporate bonds. The remainder will be raised issuing shares to domestic investors, including the National Pension Service.
New York-based Morgan Stanley has agreed to buy residential mortgage specialist Saxon Capital for $706m as the investment bank increases its mortgage origination and securitisation business in the US. Morgan Stanley recently expanded this line of business in Europe with the acquisition last December of Advantage Home Loans in the UK and Credito Fondiario e Industriale, an Italian mortgage bank, in June.
Electronic FX exchange
Chicago Mercantile Ex-change and Reuters have developed the world’s first centrally cleared electronic foreign exchange market, aimed at both smaller hedge funds being ignored by prime brokers as well as bigger funds. FXMarketSpace will open in the first quarter of next year.
Investment banks have joined forces to challenge the London Stock Exchange (LSE) in the collection and sale of trading data, a service mainly provided in Europe by the LSE. The banks that have got together to reduce time and costs of the service reportedly include Morgan Stanley, Credit Suisse, Merrill Lynch, Citigroup and UBS.
Russian alcoholic beverages producer Vinap has become the first Russian company to declare a public default on its domestic bond issue. The company declared its default after failing to pay Rbs10m ($373,000) on its Rbs400m two-year bond, which matured on August 15.
France’s Crédit Agricole has secured a 70% stake in state-controlled Emporiki Bank in what has been defined as Greece’s largest ever strategic privatisation. Crédit Agricole already owns about 9% of the Greek lender and will pay e2bn for the 61% stake held by state-owned pension funds, international institutions and retail investors. Last month, another contender for the deal, Bank of Cyprus, withdrew its bid.
Austrian Raiffeisen International has announced the acquisition of Czech eBanka. Parties agreed the acquisition of 100% of eBanka for €130m. The deal will boost Raiffeisen’s retail customer base by 70% to almost 300,000 clients in the Czech Republic.
Dutch bank ABN AMRO has announced the sale of the property and asset management activities of its subsidiary Bouwfonds to Rabobank for €845m. ABN AMRO also agreed on preliminary terms for the sale of Bouwfonds Property Finance to another local bank, SNS REAAL, for a €840m consideration. ABN AMRO decided to sell Bouwfonds’ activities because they did not fit sufficiently with the bank’s mid-market strategy.
Austria’s Erste Banke has entered the Ukrainian market with the above-50% acquisition of Bank Prestige for Hrv178.3m ($35.3m). Bank Prestige was only established in December 2005. Erste Bank and other major shareholders will invest up to Hrv757.5m each over the next four years to support the bank’s business plan.
Deutsche Bank has agreed to acquire Norisbank, part of NZ Bank Group, for a preliminary consideration of €420m. The Norisbank brand has 334,000 clients and a loan book of €1.4bn. Deutsche Bank aims to strengthen its consumer finance activities.
Russian state lightens load
The Russian state has announced its intention to cut its stake in Sberbank and Vneshtorgbank to 50% plus one share. Vneshtorgbank’s shares will be sold through an initial public offering (IPO) while the Russian central bank will sell additional shares in Sberbank to raise the bank’s capital.
Investment bank giant Goldman Sachs has been granted a licence by the Dubai Financial Services Authority to operate as an authorised firm in the new Dubai International Finance Centre. The bank announced that it wanted to expand its business in the region immediately.
Saudi petrochemical manufacturer SABIC has issued the first public sukuk (sharia-compliant bond) in the Saudi market under the new capital market law. HSBC Saudi Arabia was the lead manager. Co-managers included Banque Saudi Fransi, Gulf International Bank, National Commercial Bank, Samba Financial Group, Saudi Hollandi Bank and The Saudi British Bank. The transaction is the largest corporate sukuk in the region and is worth SR3bn ($800m).
Ithmaar Bank, a Bahrain-listed investment bank, has purchased just under 137 million shares of Shamil Bank of Bahrain at $2.93 per share from Dar Al-Maal Al-Islami Trust, increasing its stake to 60%. The acquisition broadens Ithmaar Bank’s reach into the sharia-compliant commercial banking sector.
The board of directors of London and Cairo-listed EFG-Hermes have agreed to sell 25% of its shares to Dubai-based private equity firm Abraaj Capital for $505m. If approved by shareholders and authorities, the transaction will position Abraaj Capital as the largest shareholder in EFG-Hermes, which is the largest shareholder in Lebanese bank Audi.
Dubai centre cuts ribbon
The first Dubai International Financial Centre (DIFC)-domiciled hedge fund, the Constans Crescent Investment Fund, has been launched by Argent Financial Group. The fund represents the opening of the regulated hedge fund business in the DIFC. It employs an equity long/short strategy focusing on investment opportunities in Islamic countries stretching between Morocco and Pakistan.
The China Banking Regulatory Commission is reportedly drafting a set of regulations requiring foreign banks wishing to offer credit card or renminbi-denominated services to become Chinese-registered companies, with Rmb1bn ($125m) in registered capital and Rmb100m in working capital for each branch.Overseas banks that decide not to register will be required to have much higher capital amounts before being authorised to offer such services.
Nikko Cordial Securities has announced plans to offer asset management services to wealthy families in Japan through a joint venture with Swiss-based Rothschild group’s private bank. The joint venture will be called LCF Edmond de Rothschild Nikko Cordial, 50/50 owned by the Nikko Cordial group brokerage and Banque Privée Edmond de Rothschild Europe.
Mizuho Financial Group has asked the Tokyo Stock Exchange for ¥40.4bn ($345m) in compensation for failing to stop a trading error last year. The exchange said it had no intention of complying.
State Bank of India has acquired Bank Indomex and will invest Rs25.63bn ($2.8m) to help the Indonesian bank meet the minimum capital requirement limit of Rs80m in 2007.
