China Mobile has issued details of its plans to buy a 20% strategic stake in Shanghai Pudong Development Bank (SPD) for US$5.8bn and enter into a strategic cooperation with the bank.
Upon completion of the deal, China Mobile will become the…
China Mobile has issued details of its plans to buy a 20% strategic stake in Shanghai Pudong Development Bank (SPD) for US$5.8bn and enter into a strategic cooperation with the bank.
Upon completion of the deal, China Mobile will become the second-largest shareholder in the bank after Shanghai International Group.
China Mobile will subscribe to 2.2 billion shares at CNY18.03 each, an approximate discount of 13% percent to the closing price of the bank’s shares on February 25. The transaction will be carried out via China Mobile subsidiary Guangdong Mobile for US$5.83bn in cash accrued from internal resources.
China Mobile said that the cooperation agreement will include: “Joint development of mobile phone payments business, mobile bank cards business, mobile funds transfer business and other forms of mobile finance and mobile e-commerce businesses, the joint research and development of the bundling of other forms of mobile communications and finance products as well as the joint in-depth research and development of new technologies and new products of future mobile finance and mobile e-commerce businesses.”
Shanghai Pudong Development Bank, in which Citigroup currently holds 3.8%, is a medium-sized Chinese bank with 491 outlets in China.
China Mobile is the world’s largest mobile operator by subscribers and has US$37.5bn in available cash.
The deal is subject to approval from the China Banking Regulatory Commission.
Laura Acres, Moody’s Vice President, said of the deal: “The investment by telecommunications operators into banks and credit card companies is becoming an increasing trend across the region fueled by the rise of mobile payment systems and the growth of remittances in particular. However, in this instance, given CML’s large cash position and low leverage (RMB256.0 billion and 0.3x respectively as at 30th June 2009), it is expected that a sizeable investment could be funded without any negative implications for the balance sheet.”
