Deutsche Bank may be top Huaxia holder
(Shenzhen Daily)
Updated: 2005-10-21 13:39

Deutche Bank has an option to buy German private bank Sal. Oppenheim’s stake in mid-sized Chinese lender Huaxia Bank (SHA: 600015), setting it up to become the bank’s top shareholder.

The two German banks this week confirmed they would together invest US$329 million to take a 14 percent stake in Huaxia Bank marking their first direct investment in the sector.

The investment gave Deutsche Bank a 9.9 percent stake in Huaxia, and Oppenheim a 4.1 percent share, but the deal included an option for Deutsche Bank to buy Oppenheim’s portion, Huaxia said in a statement posted on the Shanghai Stock Exchange’s Web site.

The statement also said Deutsche Bank also had priority if other Huaxia shareholders wished to sell stakes.

If Deutsche Bank were to exercise the option, it would vault Germany’s top lender past the current top shareholder, State-owned steelmaker Shougang Group, which has 11.9 percent.

Analysts and the China Securities Journal said the option and Shougang’s intent to dilute its holdings through a government-led drive to pare State involvement in listed firms meant Deutsche Bank will have the option to control Huaxia.

Analysts cited the example of Shenzhen Development Bank (SZA: 000001), where U.S. equity fund Newbridge Capital paid US$150 million to buy 17.89 percent, and become the largest shareholder, of the Chinese lender last year.

The purchase allowed Newbridge to reshuffle the bank’s board, giving the U.S. firm the top two seats of chairman and president, and assume effective control of the Chinese lender.

Deutsche’s near 10 percent investment gave it the right to appoint two directors to Huaxia’s 10-person board, Huaxia said.