ICBC to Buy 80% of Standard’s Argentine Arm

China’s ICBC has agreed to buy 80 per cent of the Argentine operations of South Africa’s Standard Bank for US$600m， according to people familiar with the plans.

Standard Bank， in which ICBC is a minority shareholder， bought 75 per cent of BankBoston in Argentina in 2006， paying about US$120m. Its Argentine partners the Werthein and Sielecki families， paid a reported US$45m for the remaining 25 per cent. ICBC is buying out the Argentine partners and Standard Bank will reduce its stake to 20 per cent. The deal values Standard Bank Argentina at about US$750m.

The minority stake， kept at the behest of the Chinese， will enable Af- rica’s largest lender to keep a foot in the Argentine market for its emerging markets franchise based in London. In Argentina， Standard Bank ranks 11th in deposits and 12th in loans and has assets of some US$3bn.

The companies are planning to invest a further US$100m in a rights issue， US$80m from ICBC， US$20m from Standard Bank， to bolster the bank’s capital， according to people familiar with their plans. As a result Standard Bank， which is refocusing on Africa and on emerging market ties to Africa after an 8 per cent fall in net interest income in 2010， will make about US$300m on its original investment.

Geoffrey Dennis， global Emerging Markets strategist at Citigroup， said the deal looked like ICBC “is making a bet on the long term prospects of Argentina”.

Argentina is enjoying high growth， the central bank is now forecasting above 7.5 per cent for 2011， but is also plagued by high inflation and Ms Fernández’s economic policies focused on fuelling demand and growth are widely seen as hard to sustain.

The acquisition is ICBC’s second biggest abroad， after the US$5.5bn it paid for a 20 per cent stake in Standard Bank itself， and just eclipsing the amount paid for Thailand’s ACL bank last year. Internationally， it has focused on building a footprint in countries where Chinese corporations are active， so that it can provide financial services to them both at home and abroad. (Financial Times)