Scotiabank, IFC to buy into Dalian Bank: sources

Jan 16, 2007 05:01:29

SHANGHAI (Reuters) - Canada's Bank of Nova Scotia (BNS.TO: Quote) and the World Bank's International Finance Corp. (IFC) are close to buying a combined 25 percent stake in China's Dalian City Commercial Bank for 2.5 billion yuan ($321.1 million), banking sources said on Tuesday. Canada's second-largest bank by market value, also known as Scotiabank, plans to invest about 2 billion yuan ($257 million) for a 20 percent stake -- the maximum allowable for a single foreign investor under Chinese law, two sources told Reuters. IFC, the World Bank's private investment arm, plans to buy a 5 percent stake in the Chinese lender in the northeastern port city of Dalian for 500 million yuan, they said. "Scotiabank will become the foreign strategic partner of Dalian Bank, while IFC will be a financial investor," said a banking source, who declined to be identified. "Dalian Bank has a good network coverage in northern China and that area has become a government focus for economic development in the next few years," the source added. Dalian Bank plans to sell 1.13 billion new shares, or 25 percent of its share capital to be enlarged by the offer, at about 2.2 yuan apiece, via a private placement with Scotiabank and IFC, the sources said. An agreement on the deal is likely to be signed around the lunar new year in mid-February, they said. Scotiabank spokesman Frank Switzer declined to comment but he said the bank is "certainly interested in growing in China." IFC and Dalian Bank declined to comment. If successful, it would become Scotiabank's second bank acquisition in China. In 2004, Scotiabank and IFC agreed to buy a combined 25 percent stake in the small-sized Xi'an City Commercial Bank in northwestern China. IFC has bought into several Chinese city commercial banks in recent years, including Bank of Shanghai, in which HSBC Holdings Plc (HSBA.L: Quote) holds an 8 percent stake. "Scotiabank has been looking for a stronger partner in China for a long time, and Dalian Bank looks like a good choice for it because the deal can help Scotiabank gain access to a huge retail market in northern China so quickly," said another source.    Continued ...